Buying property through a limited company means the company, not you, is the legal owner on the title at HM Land Registry. Rental profit is charged to Corporation Tax at 19% up to £50,000 and 25% above £250,000 rather than Income Tax at up to 45%, and mortgage interest is fully deductible. In exchange you pay higher Stamp Duty Land Tax on purchase, face a smaller pool of lenders, and are taxed again when you take the profit out.
Buying property through a limited company has become one of the most common structures for landlords and property investors in the UK, particularly for those building and purchasing a buy-to-let property portfolio, and this article explains how the structure works, when it makes financial sense, and what it costs to set up and run.
Key Takeaways
A company purchase means the property is owned by the business, not by you personally, which changes how profits, tax, and eventual sale proceeds are treated
Rental profits inside a company are charged to Corporation Tax rather than Income Tax, and mortgage interest is deducted in full before profit is calculated, unlike the restricted relief available to individual landlords under Section 24
The structure tends to suit higher-rate taxpayers building a long-term portfolio, while a single rental property held by a basic-rate taxpayer is often better held personally
Company purchases of residential property carry a higher Stamp Duty Land Tax cost than most personal purchases, since the standard rates plus the 5% surcharge apply, and profits extracted as dividends are taxed again on the shareholder. A separate flat 17% rate targets dwellings above £500,000 bought for personal occupation by connected parties, but genuine Buy-to-Let SPVs can usually claim relief from this rate
Ordinary Buy-to-Let or letting companies do not usually benefit from Business Relief for Inheritance Tax purposes, since HMRC and the tribunals treat property letting as an investment activity rather than a trade
Specialist Buy-to-Let mortgage products exist for limited companies, and lenders will expect the company to be registered with a property-related SIC code
What Does Buying Property Through a Limited Company Mean?
A limited company is often the better choice for higher-rate taxpayers who borrow a lot and put profits back into their business. For basic-rate taxpayers with one or two properties and low borrowing, personal ownership is usually better, especially if they rely on rental income. The main things to consider are your Income Tax rate, how much you plan to borrow, and whether you can keep profits in the company.
Who legally owns a property bought through a limited company?
Buying property through a limited company means the property purchase is made in the name of a UK-registered company rather than in your own name. The company becomes the legal owner of the asset, the company’s bank account receives the rent, and the company’s accounts record the income, expenses, and any gain or loss when the property is eventually sold.
Director vs Shareholder: Your Role Explained
In a property company, the director is responsible for running the business and must follow the legal duties set out in the Companies Act 2006. The shareholder owns the company and receives any dividends. Most landlords fill both roles as the sole director and sole shareholder. This distinction is important because the director handles the filing obligations, while the shareholder receives the profits.
As a Director
You run the company. Your legal duties include:
- Acting in the company's best interests
- Filing accounts and confirmation statements with Companies House
- Keeping proper accounting records
- Ensuring the company meets its tax obligations
Important: being a director does not automatically mean you own any part of the company.
As a Shareholder
You own a stake in the company. That ownership entitles you to:
- A share of profits distributed as dividends
- A say in major decisions, in proportion to your shareholding
Can You Be Both?
Many landlords are both director and sole shareholder of their property company, but the two roles are legally distinct, and it is entirely possible to be one without the other. Family investment structures often separate the roles deliberately, for example where parents act as directors. At the same time, shares are held partly by adult children, so that future income and growth sit with the next generation from the outset.
Why Buy-to-Let Purchases Usually Go Through an SPV
Most residential property purchases through a company use a Special Purpose Vehicle, commonly shortened to SPV. An SPV is simply a limited company set up with the sole purpose of holding property, rather than trading more broadly. Lenders and mortgage brokers strongly favour SPVs for Buy-to-Let purchases for a straightforward reason: a company that only holds property is far easier to assess and lend against than a company with unrelated trading activities, other liabilities, or a complex trading history. Keeping property separate from any other business activity also protects the wider business if something goes wrong with a property, and it keeps the accounting and tax position clean and easy to track, which matters both for annual filing and for any future sale of the company itself.
Should You Buy Property Personally or Through a Limited Company?
There is no single right answer here, and the decision depends heavily on your income tax position, whether you’re purchasing a buy-to-let property as a one-off or building a larger portfolio, your investment horizon, and your plans for eventual sale or inheritance.
When a Limited Company Makes Sense
A company structure tends to suit:
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Higher-rate and additional-rate taxpayers, since rental profits are taxed at Corporation Tax rates rather than at 40% or 45% Income Tax
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Investors building a portfolio over the long term, because profits can be retained and reinvested within the company at the lower Corporation Tax rate rather than being extracted and taxed each year personally
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Landlords who are heavily geared with mortgage debt, because the company deducts mortgage interest in full as a business expense, whereas individual landlords face the Section 24 restriction described below
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Those planning to hold property for many years or pass a portfolio down to family members, where the flexibility of transferring shares, rather than the property itself, can simplify succession
When Personal Ownership Is Better
Personal ownership tends to suit:
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Basic-rate taxpayers with a single rental property, who may find the mortgage interest restriction has limited impact and the Personal Allowance and lower Income Tax rates are enough to make personal ownership more efficient
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Anyone buying their own home, since a company structure is entirely unsuitable for a main residence: you would lose Private Residence Relief, face a benefit-in-kind charge for occupying a company asset, and expose the home to company creditors
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Investors who need to draw all the rental profit as personal income immediately, since extracting profit from a company as salary or dividends adds a second layer of tax that can outweigh the Corporation Tax saving
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Those who value simplicity, since personal ownership avoids the cost and administrative burden of running a company alongside the property
Comparison Table
| Factor | Personal Ownership | Limited Company (SPV) |
|---|---|---|
| Tax on rental profit | Income Tax at 20%, 40%, or 45% | Corporation Tax at 19% to 25% |
| Mortgage interest relief | Restricted to a basic rate tax credit (Section 24) | Deducted in full as a business expense |
| SDLT on purchase | Standard rates plus 5% surcharge if an additional property | Standard rates plus 5% surcharge for a genuine rental business, or a flat 17% above £500,000 if bought for personal occupation by a connected party |
| Profit extraction | None needed, profit is already yours | Requires salary or dividends, taxed again personally |
| CGT on sale | 18% or 24% depending on your tax band | Corporation Tax on the gain, then further tax if profit is extracted |
| Mortgage availability | Wide range of residential and Buy-to-Let lenders | Narrower pool of specialist Buy-to-Let lenders |
| Set-up and running costs | Minimal | Incorporation, accountancy, and filing costs each year |
| Inheritance planning | Property forms part of your estate directly. | Shares can be gifted or restructured, but Business Relief rarely applies to letting businesses. |
Tax Advantages of Buying Property Through a Limited Company
Rental profit inside a company is charged to Corporation Tax at 19% up to £50,000 and 25% above £250,000, with marginal relief between, rather than Income Tax at up to 45%. Mortgage interest is deducted in full as a business expense, profit can be retained and reinvested without a personal tax charge, and dividends can be timed across tax years.
Corporation Tax vs Income Tax on Rental Profit
Rental profit earned by a company is charged to Corporation Tax rather than Income Tax. For the 2026/27 financial year, companies with profits of £50,000 or less pay the small profits rate of 19%, companies with profits above £250,000 pay the main rate of 25%, and profits falling between these two thresholds benefit from marginal relief, which tapers the effective rate smoothly between 19% and 25%. These thresholds are reduced proportionately where a company has associated companies or a short accounting period. For a higher-rate taxpayer paying 40% or 45% Income Tax personally, the gap between that and a Corporation Tax rate of 19% to 25% is often the single biggest driver behind incorporating a property portfolio.
Full Mortgage Interest Relief and Section 24
Section 24 Mortgage interest relief is often the deciding factor for landlords with significant mortgage borrowing. Since April 2020, individual landlords have been unable to deduct mortgage interest as an expense when calculating taxable rental profit. Instead, they receive a basic-rate tax credit worth 20% of the interest paid, a change introduced under Section 24 of the Finance (No. 2) Act 2015. For a higher-rate taxpayer, this means tax is effectively charged on turnover rather than true profit in some cases, which can make a highly geared property loss-making in cash terms even though it shows an accounting profit.
A limited company is not affected by Section 24 at all. Mortgage interest is deducted in full as a normal business expense before Corporation Tax is calculated, in the same way as any other company cost. This is frequently the single most significant tax advantage of the corporate structure for landlords with high loan-to-value borrowing.
Dividend Flexibility & Retaining Profits for Reinvestment
A company does not have to distribute its profits each year. Profit retained within the company, rather than paid out as a dividend, is taxed once at Corporation Tax rates and can be reinvested directly into further property purchases, refurbishment, or mortgage repayment. This compounding effect, taxed once at up to 25% rather than taxed again personally, is a major reason company structures suit long-term portfolio building rather than landlords who need to draw all their profit as income straight away.
Where profit is drawn, it is usually taken as dividends rather than salary, since dividends do not attract National Insurance. For 2026/27, the first £500 of dividend income in a tax year is tax-free, with dividends above this taxed at 10.75% for basic-rate taxpayers, 35.75% for higher-rate taxpayers, and 39.35% for additional-rate taxpayers. This means a second layer of tax generally applies whenever profit leaves the company, so the overall efficiency of the structure depends heavily on how much profit you actually need to extract each year, as opposed to leaving invested inside the company.
Inheritance Tax & Business Relief on Company Shares
No, a typical buy-to-let or letting company usually does not qualify for Business Relief. This is because IHTA 1984 s.105(3) excludes businesses that mainly hold investments, and both HMRC and the tribunals consider letting to be an investment activity. As a result, the shares are generally taxed at 40% on death.
This is an area where the corporate structure is often oversold, and it is worth being precise about what Business Relief does and does not cover. Business Relief can reduce the value of qualifying business assets for Inheritance Tax purposes by up to 100%, and from 6 April 2026 a combined allowance of £2.5 million per individual applies to qualifying Business Relief and Agricultural Property Relief assets together, with any value above that allowance relieved at 50% rather than 100%. This allowance is transferable between spouses and civil partners, in the same way as the nil-rate band.
However, the crucial point for most property investors is that HMRC and the tax tribunals have consistently held that a business consisting wholly or mainly of letting property is an investment business, not a trading business, and investment businesses are specifically excluded from Business Relief under the relevant legislation.
This means a straightforward Buy-to-Let SPV holding let residential property will not normally qualify for Business Relief, regardless of how the company is structured or how many properties it holds. Genuine trading activity, such as property development for resale or certain serviced accommodation with a high level of additional services, may fall on the right side of the line in specific circumstances, but this depends heavily on the facts and is an area where specialist advice is essential before assuming any inheritance tax benefit exists.
Company shares can still make succession planning more flexible in practical terms, since shares can be gifted or restructured more easily than a direct share in a property, but this should not be confused with an automatic Inheritance Tax saving, and gifting shares can itself trigger Capital Gains Tax, valuation questions, and its own Inheritance Tax considerations that need to be worked through separately.
Capital Gains on Sale: Company vs Individual
When an individual sells a residential property that does not qualify for full Private Residence Relief, such as a Buy-to-Let or second home, the gain is charged to Capital Gains Tax at 18% for the portion falling within the basic rate band and 24% above that, after deducting the £3,000 annual exempt amount. UK residents must report and pay this within 60 days of completion. This is the standard position; the actual rate and amount payable can be affected by available losses, other reliefs, and exactly how much of your basic rate band remains once your other income for the year is taken into account.
When a company sells a property, the gain is added to the company’s profits and charged to Corporation Tax at the standard company rates rather than at the individual CGT rates. There is no separate annual exempt amount for a company. If the proceeds are then extracted as a dividend, a further layer of dividend tax applies to the shareholder. This means that although the initial rate of tax on the gain may be lower for a company in some scenarios, the combined effect of Corporation Tax followed by dividend tax on extraction can end up higher than the individual CGT position, particularly for gains that would otherwise fall largely within an individual’s basic rate band. Whether the company or personal route is more efficient on eventual sale depends heavily on the size of the gain, the shareholder’s tax position, and whether the proceeds need to be extracted or can remain invested in the company.
Disadvantages & Costs to Be Aware Of
The main drawbacks are higher Stamp Duty Land Tax on purchase, being taxed twice when you extract profit, a smaller pool of lenders charging higher rates, annual accounts and Corporation Tax filing costs, loss of the Capital Gains Tax annual exempt amount, and public disclosure of your directors and shareholders on the Companies House register.
Double Taxation on Extraction
Profit and gains are taxed once inside the company and again when paid out as dividends, so the overall tax saving depends heavily on how much profit you actually need to draw out each year.
Higher SDLT on Purchase
Companies buying residential property pay the standard rates plus the 5% surcharge, which is already higher than many individual purchases. A further flat 17% rate applies to dwellings above £500,000, but this is aimed at properties enveloped for the personal use of a director, shareholder, or connected person; a genuine rental business let to unconnected tenants can normally claim relief from it, provided that use continues throughout a three-year control period after purchase.
A Narrower Mortgage Market
Fewer lenders offer limited company Buy-to-Let mortgages, rates and arrangement fees are often higher than equivalent personal Buy-to-Let products, and lenders will usually require personal guarantees from the directors regardless of the company structure.
Ongoing Administration & Cost
Annual accounts, a Corporation Tax return, and a confirmation statement must all be filed with Companies House and HMRC, and most landlords will need an accountant to manage this properly.
Loss of Certain Personal Reliefs
Personal reliefs such as Private Residence Relief and the individual CGT annual exempt amount do not apply to a company, and Business Relief for Inheritance Tax will not usually apply to a straightforward letting business, as set out above.
Transparency Requirements
Companies House filings, including the confirmation statement and details of persons with significant control, are publicly visible, which some landlords prefer to avoid.
Buy-to-Let Mortgages for a Limited Company Purchase
Limited company Buy-to-Let mortgages are a well-established part of the specialist lending market, though the pool of available lenders is smaller than for personal Buy-to-Let borrowing. Lenders assess the property and rental income in broadly the same way as a personal application, but they will also want to see the company structure clearly, and in almost all cases the directors will be asked to give personal guarantees, meaning the protection of limited liability does not extend to the mortgage debt itself.
SIC Codes
Lenders and Companies House both expect a property SPV to be registered under an appropriate Standard Industrial Classification (SIC) code, since this signals the nature of the company’s activity. The codes most commonly used for property investment companies are:
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68100 – Buying and selling of own real estate
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68209 – Other letting and operating of own or leased real estate
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68320 – Management of real estate on a fee or contract basis
Most straightforward buy-to-let SPVs use 68100 or 68209, depending on whether the company’s activity is primarily holding property for letting or buying and selling property. Choosing an unrelated or overly broad SIC code can cause delays or additional questions during the mortgage underwriting process, so it is worth confirming the correct code with your accountant or broker before incorporation.
Step-by-Step Guide to Buying Property Through a Limited Company
To buy a property through a limited company, follow these seven steps: choose your company structure, register at Companies House with the right property SIC code, sign up for Corporation Tax with HMRC, open a business bank account, secure buy-to-let finance for the company, ask a solicitor to handle the purchase, and set up regular accounting. The whole process usually takes about three months.
Decide on the Structure
Confirm whether an SPV is appropriate, decide on the shareholding structure, and consider whether family members should hold shares from the outset.
Incorporate the Company at Companies House
Choose a company name, register the appropriate SIC code, and appoint at least one director and issue shares to the initial shareholders.
Register for Corporation Tax with HMRC
This must be done within three months of the company starting to trade. For a property SPV, HMRC generally treats this as beginning once the rental activity itself is under way or sufficiently advanced, such as exchanging contracts or receiving rent, rather than simply from the point the company starts searching for a property.
Open a Business Bank Account
Most lenders and letting agents will require this before completion, and it keeps company funds properly separate from personal finances.
Arrange Limited Company Buy-to-Let Mortgage Finance
Approach a broker experienced with limited company lending, since product availability and criteria differ significantly from personal Buy-to-Let mortgages.
Instruct a Solicitor & Complete the Purchase
The company's solicitor handles the purchase contract, mortgage deed, and Land Registry application, all completed in the company's name, then files the SDLT return and pays any tax due within 14 days of completion.
Set Up Ongoing Accounting
Register with an accountant for bookkeeping, annual accounts, the Corporation Tax return, and the Companies House confirmation statement.
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What It Costs to Set Up and Run a Property SPV
It costs £50 to set up a company online at Companies House, and the annual confirmation statement is £34. The biggest ongoing expense is accountancy, which covers bookkeeping, statutory accounts and the CT600 return. If you own several properties, you may also need property accounting software. Fees for limited company buy-to-let arrangements are usually higher than for personal ones.
Incorporating a company at Companies House costs a modest one-off fee, but the ongoing running costs are the figure most landlords underestimate. Expect to budget for annual accountancy fees covering bookkeeping, statutory accounts, and the Corporation Tax return, along with the Companies House confirmation statement fee each year. Many landlords also pay for specialist property accounting software to track income and expenses across multiple properties, and if the company is VAT registered for any commercial element of its portfolio, quarterly VAT return costs will apply as well.
Mortgage arrangement fees for limited company products also tend to run higher than equivalent personal Buy-to-Let products, and this should be factored into the overall cost comparison rather than looked at as a one-off expense.
Transferring an Existing Property Into a Limited Company
Moving a property you already own personally into a company is not a simple administrative change. Legally, it is treated as a sale from you to the company, even though no external buyer is involved, which means it can trigger both Capital Gains Tax on any gain built up since you bought the property and Stamp Duty Land Tax on the transfer, calculated on the property’s market value rather than any lower figure you might choose to record.
There are limited circumstances where incorporation relief can defer the Capital Gains Tax charge, but this generally requires the letting activity to be run as a genuine business rather than passive property ownership, and the position depends heavily on the specific facts, including how much time is spent managing the properties and whether additional services are provided. This is a notoriously litigated area, and the availability of incorporation relief is highly fact-specific and should not be assumed.
Given the combined SDLT and CGT exposure, transferring an existing portfolio into a company is a decision that needs individual modelling before proceeding, and the answer will vary significantly depending on how much the property has grown in value and how it is currently financed.
Is Buying Property Through a Limited Company Right for You?
The right answer depends on your tax position, how many properties you plan to hold, whether you need to draw the rental profit as income now or can afford to reinvest it, and your long-term plans for the portfolio. A company structure tends to reward higher-rate taxpayers building a portfolio over many years, while it adds cost and complexity that may not be worthwhile for a single, lightly geared property held by a basic-rate taxpayer. Clients based outside the UK should also note that non-resident companies and individuals face an additional 2% SDLT surcharge on top of the rates set out above, and non-resident landlords have separate reporting obligations regardless of whether the property is held personally or through a company, so this should be factored into any comparison alongside the points covered in this article.
Frequently Asked Questions
It can be a good idea, particularly for higher-rate taxpayers building a long-term portfolio with significant mortgage borrowing, since the company structure avoids the Section 24 mortgage interest restriction and is taxed at Corporation Tax rates rather than Income Tax rates. It is generally less advantageous for a basic-rate taxpayer holding a single, lightly geared property, where the extra cost and complexity of running a company may outweigh the tax benefit.
Yes. You cannot use a standard residential or personal buy-to-let mortgage. Lenders require a specific limited company buy-to-let product, and the pool of lenders offering these is smaller than the personal BTL market. |
Deposit requirements for limited company buy-to-let mortgages are broadly similar to personal buy-to-let lending, though many lenders in this space ask for a slightly higher deposit, commonly starting from around 20% to 25% of the property’s value. The exact figure depends on the lender, the property type, and the strength of the rental income relative to the mortgage.
No. Buying through a limited company does not avoid Stamp Duty Land Tax, and in most cases it results in a higher SDLT bill than an equivalent personal purchase, since companies pay the standard rates plus the 5% surcharge on residential property regardless of the structure used. A separate flat 17% rate can also apply to dwellings above £500,000, but this is specifically aimed at properties enveloped within a company for the personal occupation of a director, shareholder, or connected person, and relief from it is available where the property is genuinely let to unconnected tenants as part of a rental business, which describes most ordinary buy-to-let SPVs. There is no SDLT advantage to the corporate route on purchase either way; the tax benefits of a company structure arise later, through Corporation Tax treatment of rental profit and full mortgage interest relief.
The 2% rule is a rough investment guideline, not a tax rule, used by some property investors to quickly screen potential purchases. It suggests that a rental property’s monthly rent should be at least 2% of the purchase price for the investment to be considered strongly cash-flow positive before costs. It is a general rule of thumb rather than a guarantee of profitability, and it does not account for financing costs, void periods, maintenance, or the tax treatment of the profit, so it should only ever be used as an initial screening tool alongside a fuller financial appraisal.
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