In short: If you’re a higher or additional-rate taxpayer with mortgage debt, a limited company (SPV) usually wins on ongoing tax because it avoids Section 24’s restriction on mortgage interest relief and pays corporation tax (19–25%) instead of income tax (up to 45%) on profit. But incorporating an existing portfolio triggers Capital Gains Tax and Stamp Duty Land Tax (with a 5% surcharge) as if you sold it to yourself, mortgage rates for limited companies are typically higher, and there’s more admin (separate accounts, corporation tax returns, and getting profit out via dividends). For a new purchase, especially with debt, a company is often the better long-term structure; for an existing unmortgaged or low-rate property, or a basic-rate taxpayer, staying personal can still make sense.
Why this question dominates landlord forums: Section 24
Since April 2020, Section 24 of the Income Tax Act has fully applied to individual landlords: you can no longer deduct mortgage interest as an expense before calculating taxable profit. Instead, you get a flat 20% tax credit on your finance costs. For a basic-rate taxpayer this is broadly neutral, but for a higher-rate (40%) or additional-rate (45%) taxpayer it can be brutal, you’re taxed on turnover that includes money you never actually received as profit, because it went straight to your mortgage lender as interest.
Landlord tax calculator
Section 24 calculator: own name or limited company?
Enter a year’s figures for your property. See what Section 24 costs you, and what you’d keep if you owned it through a limited company instead.
Letting a property? We help landlords get the most from their rent.
Or book a callAn estimate for one owner using England, Wales and Northern Ireland tax rates. It leaves out pension contributions, losses and interest carried forward from earlier years, other companies you own, taking a salary from the company, and Incorporation Relief. It isn’t tax advice: speak to a property accountant before you change how you own a property. Sources: GOV.UK Section 24 guidance, income tax rates, corporation tax rates.
Example: A higher-rate landlord with £10,000 of mortgage interest used to save £4,000 in tax (40% relief). Under Section 24 they get only a £2,000 credit (20%), an effective £2,000 extra tax bill, regardless of whether the property made a real profit that year. In highly geared portfolios with tight margins, this has pushed some landlords into paying tax on a loss-making property in cash terms.
Section 24 does not apply to limited companies. A company can still deduct 100% of mortgage interest as a normal business expense before calculating profit, then pays corporation tax on what’s left.
The tax comparison at a glance
Personal ownership: – Rental profit taxed as income at your marginal rate: 20%, 40% or 45% (plus a starting 0% band via your personal allowance) – Mortgage interest gets only a 20% tax credit, not full deduction – Capital gains on sale taxed at 18% (basic rate band) or 24% (higher rate) on residential property gains
Limited company (SPV) ownership: – Full mortgage interest deduction against rental profit – Profit taxed at corporation tax rates: 19% on profits up to £50,000, 25% above £250,000, with marginal relief tapering between the two – To spend the money personally, you then pay dividend tax (or salary/PAYE) on top when you extract profit, this is the catch: company profit isn’t “your” money until you take it out – Capital gains on sale are inside the company (corporation tax on the gain, not personal CGT), and getting the sale proceeds out to you personally usually means another tax event (dividend or liquidation)
The company route wins hands-down if you’re reinvesting profit to grow the portfolio rather than drawing it out to live on, because you’re only paying corporation tax, not corporation tax plus dividend tax. If you need the rental income to live on now, the two extra layers of tax on extraction can erode much of the Section 24 saving.
Mortgages: still the biggest practical constraint
Limited company (SPV) buy-to-let mortgages are a smaller, more specialist market than personal BTL mortgages. Expect:
- Fewer lenders, though the market has grown substantially since 2020
- Typically higher interest rates and/or arrangement fees than equivalent personal BTL products
- Often a requirement for personal guarantees from the director(s), meaning you don’t fully escape personal liability anyway
- Some high-street lenders still won’t lend to limited companies at all
If you’re planning to hold for decades and reinvest, the rate premium is often worth it. If you’re a smaller landlord with one or two properties on cheap legacy personal mortgages, remortgaging into a company at a materially higher rate can wipe out the tax saving.
The incorporation trap: moving existing property into a company
This is where many landlords get caught out. Transferring a property you already own personally into a limited company is treated by HMRC as a sale at market value, even though no money changes hands with a third party. That means:
- Capital Gains Tax on the personal disposal, 18% or 24% on the gain, depending on your income tax band
- Stamp Duty Land Tax payable by the company on the market value of the property, including the 5% additional-property surcharge on top of standard SDLT rates (raised from 3% to 5% at the October 2024 Budget)
- Possible early repayment charges if you’re breaking a personal mortgage to remortgage into the company’s name
Incorporation Relief (which defers the CGT) exists, but HMRC and case law (notably Ramsay v HMRC) set a high bar: you generally need to show you’re running a genuine property business, not just holding passive investments, broadly meaning substantial personal time involvement (case law has referenced around 20 hours a week), not simply using a letting agent. Most ordinary landlords with a handful of let properties won’t qualify. Even where Incorporation Relief defers the CGT, it does nothing for the SDLT bill, which is still due upfront. For a typical portfolio, the combined SDLT and CGT cost of incorporating can easily exceed several years’ worth of the tax saving you’re chasing, run the actual numbers with an accountant before committing.
Admin burden
A limited company means: annual accounts filed at Companies House, a corporation tax return each year, potentially payroll if you take a salary, and generally higher accountancy fees than a personal Self Assessment return. It’s manageable, but it’s a real, recurring cost and time commitment that personal ownership doesn’t have.
Rule of thumb
- New purchase, using a mortgage, higher-rate taxpayer, building a portfolio long-term: company usually makes more sense.
- Existing property, low or no mortgage, basic-rate taxpayer, or you need the income now: staying personal is often simpler and cheaper.
- Either way: this is a decision worth paying a property-specialist accountant for a proper personalised calculation before you act, the “right” answer depends heavily on your tax band, gearing, and time horizon, and getting it wrong is expensive and hard to reverse.
Related reading
Sources
- Changes to tax relief for residential landlords: how it’s worked out, including case studies, GOV.UK
- Set up a limited company: step by step, GOV.UK
This is general information, not legal, tax, or financial advice. Rules referenced are accurate to the best of available information as of July 2026 for England unless stated otherwise. Always check current government guidance (gov.uk) or consult a solicitor/accountant for your specific situation.
Last Updated on September 28, 2026