Ltd Company vs Personal Name for Property: Which Saves More Tax?
2026-06-26
This is the most common structural question in UK property investing, and it's one that most people get wrong — either because they've been told "always use a company" by someone on social media, or because they haven't done the maths for their specific situation.
The truth: there is no universal right answer. A limited company saves significant tax for some investors and costs more for others. This guide gives you the framework to work it out for yourself.
The Core Difference
Personal name: Rental profit is taxed as income tax (20%, 40%, or 45%). Mortgage interest is NOT deductible — you get a 20% tax credit instead (Section 24).
Limited company (SPV): Rental profit is taxed as corporation tax (25%, or 19% on the first £50,000). Mortgage interest IS fully deductible as a business expense. But extracting money from the company triggers further tax.
The key trade-off: a company pays less tax on profits retained inside the company. But the moment you take money out (salary, dividends, or director's loan repayment), you face additional personal tax.
Section 24: Why Companies Exist for Property
Section 24 of the Finance Act 2015 is the reason limited company property ownership exploded in the UK. Before 2017, landlords could deduct their full mortgage interest from rental income before calculating tax. A higher-rate taxpayer effectively got 40% tax relief on interest payments.
Section 24 phased this out. Now, mortgage interest is not deducted from income at all. Instead, you receive a basic-rate (20%) tax credit. The impact:
- Basic-rate taxpayers: Roughly neutral. 20% relief before, 20% credit now.
- Higher-rate taxpayers: Significant hit. 40% relief before, 20% credit now. Plus, the gross rental income can push you into higher bands.
- Additional-rate taxpayers: Devastating. 45% relief before, 20% credit now.
Limited companies are not affected by Section 24. They deduct mortgage interest in full from profits, then pay corporation tax on what's left.
The Tax Comparison
Let's compare the same property, same numbers, under both structures.
Property: £200,000, rented at £12,000/year, mortgage interest £7,500/year, other costs £2,500/year. Investor has a £55,000 salary (higher-rate taxpayer).
Personal Name
| Item | Amount |
|---|---|
| Rental income | £12,000 |
| Less allowable costs | -£2,500 |
| Taxable rental profit | £9,500 |
| Tax at 40% (higher rate) | £3,800 |
| Less Section 24 credit (20% of £7,500) | -£1,500 |
| Net tax on rental income | £2,300 |
| After-tax profit | £200 |
You earned £12,000 in rent, spent £10,000 on mortgage + costs, and kept... £200 after tax. On paper you made £2,000 profit before Section 24. After Section 24, HMRC takes £2,300, leaving you with negative £300 in real terms (since £7,500 of interest was paid but only £1,500 was credited back).
Wait — that means you're losing money after tax despite the property cashflowing. This is the Section 24 trap for higher-rate taxpayers.
Limited Company
| Item | Amount |
|---|---|
| Rental income | £12,000 |
| Less mortgage interest | -£7,500 |
| Less other costs | -£2,500 |
| Taxable profit | £2,000 |
| Corporation tax (19% small profits rate) | £380 |
| Net profit retained in company | £1,620 |
The company pays £380 in tax. Versus £2,300 in personal name. That's a £1,920 annual saving PER PROPERTY.
:::stats £2,300 | Tax (Personal Name, Higher Rate) £380 | Tax (Ltd Company) £1,920/yr | Annual Saving Per Property :::
But You Need to Get the Money Out
The company saved tax on profits. But that £1,620 is sitting inside the company. If you want to spend it, you need to extract it — and that triggers further tax.
Extraction Methods
Salary: Tax-deductible for the company, but subject to income tax and National Insurance. The optimal salary in 2025/26 is typically £12,570 (personal allowance threshold) — above this you're paying 13.8% employer's NIC plus employee income tax.
Dividends: Not deductible for the company, but lower personal tax rates than salary above the personal allowance. Dividend tax rates: 8.75% (basic), 33.75% (higher), 39.35% (additional). Plus the £500 dividend allowance.
Director's loan repayment: If you lent money to the company (e.g., the deposit), the company can repay it tax-free. This is the most efficient initial extraction — repaying your own capital.
The Full Tax Picture (Salary + Dividends)
If the company makes £10,000 profit (after all costs including interest) and you extract it all:
| Method | Corp Tax | Personal Tax | Total Tax | Effective Rate |
|---|---|---|---|---|
| All retained (no extraction) | £1,900 | £0 | £1,900 | 19% |
| All as dividends (higher rate) | £1,900 | £2,700 | £4,600 | 46% |
| Optimal salary + dividends | £1,900 | ~£1,800 | ~£3,700 | 37% |
When you include extraction, the combined rate is 37-46% — not dramatically different from 40% income tax in personal name. The advantage shrinks once you need to use the money.
The real advantage emerges when you DON'T extract. If you leave profits in the company and use them to fund the next deposit, you're only paying 19-25% corporation tax — not 40%+ income tax. The company grows faster because less tax leaks out during the accumulation phase.
When to Use a Company
Strong case for a company:
- You're a higher-rate (40%) or additional-rate (45%) taxpayer
- You're building a portfolio (profits reinvested, not extracted)
- You have significant mortgage debt (Section 24 impact is high)
- You don't need the rental income for living expenses
- You're buying new properties (not transferring existing ones)
Weak case for a company:
- You're a basic-rate taxpayer (Section 24 barely affects you)
- You only own 1-2 properties with small mortgages
- You need the rental income to live on (extraction wipes out the tax saving)
- You already own properties personally (transfer triggers SDLT + CGT)
- You want simplicity (companies require accounts, filings, and admin)
The Transfer Problem
The biggest issue with companies: if you already own properties personally, transferring them to a company is treated as a sale. This triggers:
- Capital Gains Tax on any gain since you purchased
- Stamp Duty on the transfer (at market value, including the 5% surcharge)
- Legal fees for both the sale and purchase
On a property worth £250,000 with £80,000 of gains, a transfer could cost £20,000-£40,000 in CGT + SDLT + legal fees. The tax savings in the company would need years to recoup this.
This is why most advisors recommend: start with a company from the beginning if you think you'll need one. Don't buy personally and try to transfer later — it's expensive and complex.
Other Considerations
Mortgage Rates
Company BTL mortgages are 0.3-0.8% more expensive than personal-name equivalents. On a £150,000 mortgage, that's £450-£1,200 extra per year. This offsets some of the tax saving.
Annual Costs
A limited company requires:
- Annual accounts filed with Companies House (accountant: £300-£800/year)
- Corporation tax return filed with HMRC (often included in accounts fee)
- Confirmation statement (£13/year)
- Registered office (free if using your home)
Inheritance Tax
Properties in a company are treated as shares. With proper planning (family investment companies, share gifting), this can be more tax-efficient for inheritance than properties held personally. Seek specialist advice.
Multiple Companies
Some investors create a separate SPV for each property. Others use a single company for the whole portfolio. Separate SPVs are cleaner for liability isolation but more expensive to administer. A single company is simpler but all properties are linked for liability purposes.
Run the Numbers for Your Situation
The Rental Tax Calculator models both scenarios — personal name with Section 24 and limited company with full interest deduction. Input your salary, rental income, and mortgage interest to see the exact tax difference.
:::tool rental-tax Compare Personal vs Company Tax :::
For the impact on deal viability (higher mortgage rates in a company vs tax saving), run the property through the Deal Analyser under both structures.
Decision Checklist
Ask yourself these questions:
- Am I a higher-rate taxpayer? (If no → personal name is probably fine)
- Am I building a portfolio of 3+ properties? (If yes → company is worth considering)
- Do I need the rental income to live on? (If yes → company advantage is reduced by extraction tax)
- Am I buying NEW properties? (If yes → company from day one is clean)
- Do I already own properties I'd want in the company? (If yes → transfer costs may be prohibitive)
If you answered yes to questions 1, 2, and 4 — a limited company is almost certainly the right structure. If you answered yes to 3 and 5 — it's more complicated and needs specialist accountant advice.
Summary
- Companies pay corporation tax (19-25%) with full mortgage interest deduction
- Personal name pays income tax (20-45%) with only a 20% interest credit (Section 24)
- The company wins during accumulation (profits reinvested, not extracted)
- The advantage narrows when you extract money (dividends are taxed again)
- Don't transfer existing properties to a company without calculating the SDLT + CGT cost
- Always buy through a company from the start if you expect to be a higher-rate portfolio landlord
- Get specialist property tax advice — the decision is worth thousands per year
This guide is for educational purposes only and should not be treated as financial or tax advice. Tax rules are complex and individual circumstances vary. Always consult a qualified property tax specialist before making structural decisions.