Buy-to-Let: Personal Name vs Limited Company — The Tax Comparison

2026-07-23

The Question Every Growing Landlord Asks

Once you own two or three buy-to-let properties, someone will tell you to "go limited." Maybe it's your accountant, maybe it's a podcast host, maybe it's someone in a Facebook group who says they're saving thousands. The advice is everywhere, and it's often wrong — or at least, incomplete.

The personal vs limited company decision depends on your specific circumstances: your income tax band, your mortgage interest costs, how many properties you own, whether you plan to grow, and how you want to extract the income. There is no universal right answer.

How Personal Ownership Is Taxed (2025/26)

When you own a rental property in your personal name, the income and gains are taxed as follows:

Rental Income

Rental profit (rent minus allowable expenses) is added to your employment or self-employment income and taxed at your marginal rate:

• Basic rate (up to £37,700 above personal allowance): 20%
• Higher rate (£37,701-£125,140): 40%
• Additional rate (over £125,140): 45%

Section 24: The Mortgage Interest Restriction

This is the rule that changed everything. Since April 2020, mortgage interest is no longer deductible from rental income. Instead, you get a 20% tax credit on the interest paid.

For basic-rate taxpayers, the effect is neutral — you were getting 20% relief before, you get 20% relief now. For higher-rate taxpayers, you've lost the difference. On £10,000 of mortgage interest, a 40% taxpayer used to save £4,000 in tax. Now they save £2,000. That's £2,000/year of extra tax per property.

The secondary impact is worse: the full rental income (before the tax credit) counts as taxable income, which can push you into a higher band or trigger the personal allowance taper above £100,000. This phantom income effect catches people who didn't see it coming.

Capital Gains on Sale

When you sell, the gain is taxed at 18% (basic rate) or 24% (higher rate), with a £3,000 annual exempt amount.

How Limited Company Ownership Is Taxed

When a property is owned by a Special Purpose Vehicle (SPV) — a limited company set up specifically for property investment — the tax treatment is fundamentally different.

Corporation Tax on Profits

The company pays Corporation Tax on its profits at 25% (for profits over £250,000) or 19% (small profits rate, under £50,000), with marginal relief in between.

Crucially, mortgage interest is a fully deductible business expense. Section 24 does not apply to companies. On £10,000 of mortgage interest, the company deducts the full amount before calculating tax. For a higher-rate personal taxpayer, this alone can save £2,000+ per property per year.

Extracting the Money

Here's where people trip up. The money is in the company, not in your pocket. To get it out, you have three options:

• Salary: Tax-deductible for the company, but you pay Income Tax and National Insurance. Most landlords pay a small salary up to the NI threshold (£12,570 in 2025/26) and nothing more.
• Dividends: Paid from post-tax profits. You get a £1,000 dividend allowance, then pay 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate). The combined Corporation Tax + Dividend Tax rate ranges from 26% to 55%.
• Director's loan: You can lend money to yourself, but if not repaid within 9 months, the company pays 33.75% Section 455 tax (refundable when repaid). Not a long-term extraction strategy.

The Comparison: A Worked Example

Property generating £12,000/year rent, with £6,000 mortgage interest, £1,500 other expenses.

Personal (Higher-Rate Taxpayer)

• Rental profit (rent - expenses, but NOT mortgage interest): £12,000 - £1,500 = £10,500
• Income Tax at 40%: £4,200
• Section 24 tax credit (20% × £6,000): -£1,200
• Net tax: £3,000
• Cash left: £12,000 - £6,000 - £1,500 - £3,000 = £1,500

Limited Company

• Rental profit (rent - expenses - mortgage interest): £12,000 - £6,000 - £1,500 = £4,500
• Corporation Tax at 19%: £855
• Profit after Corp Tax: £3,645
• Dividend Tax at 33.75% (higher rate, above allowance): £1,230
• Net tax (Corp Tax + Dividend Tax): £2,085
• Cash left after all tax: £12,000 - £6,000 - £1,500 - £2,085 = £2,415

Annual saving through the company: £915 per property. On a 5-property portfolio, that's £4,575 per year.

When Personal Ownership Wins

• You're a basic-rate taxpayer: Section 24 doesn't hurt you, and extracting money from a company via dividends adds complexity and cost for no tax benefit.
• You're selling soon: CGT at 24% (personal) is often cheaper than Corporation Tax on the gain plus Income Tax on extraction.
• Low or no mortgage: If your mortgage interest is small, Section 24's impact is negligible and the company structure adds cost without sufficient benefit.
• You own 1-2 properties: The accounting and compliance costs of running a company (£500-£1,500/year) can exceed the tax saving.

When a Company Wins

• You're a higher or additional-rate taxpayer: Section 24 creates a significant tax drag that the company structure eliminates.
• You're growing the portfolio: Retained profits compound inside the company at 19-25% tax, vs 40-45% if extracted personally. Reinvesting within the company is dramatically more efficient.
• You don't need the income now: If you have other income and are building long-term wealth, leaving profits in the company to fund the next deposit is the most tax-efficient path.
• You have high mortgage interest: The bigger the Section 24 hit, the bigger the company advantage.

The Transfer Question

If you already own properties personally, transferring them to a company triggers CGT on the personal disposal and SDLT on the company purchase. On a property worth £250,000 bought for £180,000, you're looking at roughly £14,000 in CGT plus £10,000 in SDLT — £24,000 to transfer one property.

The transfer only makes sense if the cumulative tax savings over your holding period exceed the transfer costs. On a property you plan to hold for 20+ years with significant mortgage interest, the numbers usually work. On a property you might sell in 5 years, they usually don't.

For most growing landlords, the pragmatic answer is: keep existing properties personal, buy new acquisitions through a company. This avoids the transfer costs while capturing the company benefits on every future purchase.

Get the Maths Right

This decision is too important and too specific to get from a blog post alone. What I've given you is the framework. The actual numbers depend on your income, your mortgage rates, your growth plans, and your extraction needs.

Run the comparison for your specific situation. Model both structures over 10 years, including the compounding effect of retained profits in a company vs extracted profits personally. The right answer will be obvious once you see the numbers side by side.