Article
Why Hold Your Properties Through a Limited Company?
Increasing property tax rates for individual landlords from 6th April 2027, combined with restrictions on mortgage interest relief under Section 24, have led many landlords to consider holding property through a limited company.
Last updated 4 Jun 2026 | First published 4 Jun 2026
By Kiran Kaur, ACA 3 min read
Landlords
A limited company pays corporation tax , rather than income tax , on rental profits. This can be significantly more tax efficient for higher and additional rate taxpayers, especially if profits are retained for reinvestment. However, incorporation is not right for everyone, and professional advice is essential before restructuring your property portfolio.
The tax case for a limited company
Limited companies pay corporation tax on rental profits at:
19% on profits up to £50,000
25% on profits above £250,000.
Marginal relief may apply between these thresholds. Further tax is only payable when profits are withdrawn personally by a shareholder.
By comparison, individual landlords pay income tax on rental profits, whether extracted or not, at 20%, 40% and 45% in England, Wales and Northern Ireland and rates between 19% and 48% in Scotland. From 6th April 2027, separate higher rates for property income are due to apply for England, Wales and Northern Ireland:
| Tax band for property income | Before 6th April 2027 | From 6th April 2027 |
|---|---|---|
| Basic | 20% | 22% |
| Higher | 40% | 42% |
| Additional | 45% | 47% |
The Scottish Government has not yet announced whether it will increase income tax rates on property income in line with the rest of the UK.
Mortgage interest relief is another key difference. Under Section 24 of the Finance (No.2) Act 2015, from 2015 individual landlords could no longer deduct mortgage interest fully from rental income. Instead, they receive a 20% basic rate tax credit only (due to increase to 22% from 6th April 2027 to match property income tax). As this relief is capped at the basic rate, higher and additional rate taxpayers are unable to benefit from the same level of tax efficiency.
Limited companies are not subject to these restrictions and can fully deduct mortgage interest and finance costs before corporation tax is calculated.
With the upcoming income tax rate increase on top of restricted mortgage interest relief, incorporation is becoming an increasingly attractive option for higher and additional rate taxpayers looking to expand their property portfolio.
Many landlords use a Special Purpose Vehicle (SPV) structure, which is a limited company created solely to hold property investments. This creates limited liability, as the company has no other business interests. Many buy-to-let lenders prefer this structure.
You can read more about the sole trader vs limited company decision here.
How you extract money matters
Although a limited company can sometimes pay less tax on retained profits, tax may still arise when you withdraw profits.
Many directors choose to structure their remuneration through a combination of salary, dividends and pension contributions. Note that from 6th April 2026, dividend tax rates have increased for basic rate and higher rate taxpayers to 10.75% and 35.75%. The additional rate remains unchanged at 39.35%.
A company structure is usually most efficient where profits are retained and reinvested back into the business, rather than fully extracted each year.
You can read more about directors’ cash extraction here
The costs and trade-offs of incorporating
Incorporation can trigger tax liabilities if you already own rental properties personally that you plan to transfer to hold in the company.
Capital gains tax
Capital Gains Tax (CGT) may be payable on the market value of the property transferred to a limited company. This is charged on 18% or 24%, depending on your tax band, with a £3,000 annual exemption.
Incorporation relief
Incorporation relief may be available if:
- you run a property rental business as a sole trader,
- you transfer the property to a company in return for shares.
This temporary CGT relief allows you to defer the capital gain until you sell the shares. If you receive cash and shares for the property, you must pay CGT on the cash portion.
From 6th April 2026, incorporation relief will not automatically apply and it must be claimed through your self-assessment tax return.
Land taxes
In England and Northern Ireland, Stamp Duty Land Tax (SDLT) may also be payable on the market value of the property, with a 5% surcharge on additional residential properties. Residential properties worth over £500,000 may fall within the 17% flat SDLT rate for companies. In Scotland and Wales, the equivalent land taxes apply (Land and Buildings Transaction Tax and Land Transaction Tax)
There are also additional compliance costs, including drawing up annual accounts and submitting corporation tax returns. Mortgage products for companies can also be more limited and expensive.
If your company owns residential property valued at over £500,000 each, annual charges may be payable, called the Annual Tax on Enveloped Dwellings (ATED).
Who is a limited company property business right for?
A limited company structure may suit:
- higher and additional rate taxpayers
- landlords with several properties
- landlords planning to reinvest profits for expansion
It may be less beneficial for:
- basic rate taxpayers
- landlords with only a couple of properties
- individuals needing to withdraw all rental profits personally each year
Every landlord’s position is different, so professional advice is essential before making changes to your property business structure.
How can TaxAssist Accountants help?
Holding property through a limited company can provide tax efficiencies. This is particularly true for landlords paying higher rates of tax, or reinvesting profits. However, incorporation also brings additional tax, compliance and financing considerations.
To discuss the most tax-efficient structure for your property portfolio, call TaxAssist Accountants on 01772 395 720 or use our online contact form here.
Frequently Asked Questions
It depends on your income, number of properties, personal financial position and long-term plans. Professional advice is recommended before incorporating as moving property into a company can be complex for tax purposes.
There is no right or wrong answer and there are pros and cons of operating as a sole trader or a private limited company. Sole traders have less admin and reporting requirements, and the finances are simple to administer. A private limited company may be more tax efficient and make it easier to get loan finance but will mean more admin and reporting requirements and less privacy.
Allowable expenditure can be deducted against property income which reduceds your profits and tax liability. Keeping good accounting records is essential for ensuring your report your income and expenses accurately to HMRC and only pay as much tax and you should.
If you're not sure what expenses are allowable, refer to our guide to landlord tax and allowable expenses.
Often this is true, particularly for higher and additional rate taxpayers. A limited company pays corporation tax on rental profits at 19% on profits up to £50,000 and 25% for profits above £250,000. This compares with income tax rates of up to 45% for individuals in England, Wales and Northern Ireland and up to 48% in Scotland. From April 2027, new standalone property income tax rates apply to individual landlords. The basic rate will be 22%, higher rate 42% and additional rate 47%, widening the gap further. However, when profits are extracted from a company as dividends, income tax applies in addition to corporation tax on profits. A limited company structure is most tax-efficient when profits are retained within the company for reinvestment rather than withdrawn. Always seek tailored professional advice.
Section 24, introduced in the Finance (No. 2) Act 2015, restricts mortgage interest relief available to individual landlords. Rather than deducting finance costs in full, individuals receive only a 20% tax credit. This significantly decreases taxable profits for higher-rate taxpayers. From April 2027, this credit will rise to 22% in line with the new property basic rate. Limited companies are exempt from Section 24. A company may deduct 100% of mortgage interest as a business expense before calculating corporation tax. For landlords, this difference alone can make the limited company route substantially more tax efficient.
Yes, but it is not straightforward. Transferring personally owned property into a company is treated as a disposal for Capital Gains Tax (CGT) purposes, potentially triggering a CGT liability on any gain. Stamp Duty Land Tax (SDLT) (or the Scottish and Welsh equivalents, Land and Buildings Transaction Tax and Land Transaction Tax) is also typically charged on the property’s market value, and your mortgage lender's consent is usually required. Incorporation relief may defer CGT if the portfolio qualifies as a genuine property business, but HMRC actively challenges this for passive landlords. From April 2026, incorporation relief must be actively claimed on your self-assessment tax return; it no longer applies automatically. Specialist accountancy advice is essential before any transfer.
Yes. Companies buying residential property pay the higher rates of Stamp Duty Land Tax (SDLT) in England and Northern Ireland and higher rates of the Scots and Welsh equivalents (Land and Buildings Transaction Tax and Land Transaction Tax respectively). This additional cost should be factored into any investment calculation. Always model tax costs carefully before purchase.
It can be. Holding property through a company can make succession planning more flexible as you can gift or sell shares in the company to family members rather than transferring property itself, which can carry significant capital gains tax (CGT) and stamp duty land tax (SDLT) (or Scots or Welsh equivalent) implications. The inheritance tax treatment of company shares is complex, and the rules are subject to change. Independent legal and tax advice is essential before using a limited company for estate planning purposes. TaxAssist Accountants can help you explore the right approach for your circumstances.
Last updated 4 Jun 2026 | First published 4 Jun 2026
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Kiran Kaur, ACA
Kiran is a Chartered Accountant (ACA) with over a decade of experience in the tax profession, including roles at Big Four and Top Ten firms. She specialises in advising both multinational corporations and UK-based companies on a wide range of tax matters. Kiran runs a growing YouTube channel dedicated to demystifying complex tax and personal finance topics. She also writes insightful articles aimed at helping business owners stay tax-compliant and operate more efficiently.
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