Why this question keeps coming up
Three things have converged to make the buy-to-let company conversation unavoidable in 2026, and Section 24 is the biggest. Section 24 of the Finance Act 2015 (the mortgage interest restriction) has been fully phased in since 2020/21, so higher-rate landlords can no longer deduct mortgage interest from rental income. They get a 20 percent basic-rate tax credit instead, and for anyone already paying 40 percent income tax, that gap bites hard.
From 6 April 2027, separate higher rates of property income tax come into force in England, Wales and Northern Ireland: 22 percent at basic rate, 42 percent at higher rate, and 47 percent at additional rate. The order of allowances also changes so the personal allowance is applied to non-property income first, pushing more rental profit into the higher bands. On top of that, Making Tax Digital for Income Tax became mandatory from April 2026 for landlords with gross income above £50,000 (the threshold is gross rent, not net), replacing the annual return with quarterly digital filing.
So the question reaches us regularly as specialist landlord accountants: given all this, is a limited company structure worth it? Here is an honest answer, with the actual numbers.
What a property limited company does for your tax bill
The central advantage is simple: a company deducts mortgage interest in full, and Section 24 does not apply to companies at all. Most landlords who incorporate use an SPV (Special Purpose Vehicle), a limited company formed purely to hold residential property under SIC code 68100 or 68209. It is a standard UK company in every legal sense; the distinction is its narrow, single purpose.
Corporation Tax runs at 19 percent on profits up to £50,000 and 25 percent above £250,000, with marginal relief between. A personal higher-rate landlord pays 40 percent income tax, rising to 42 percent on property income from April 2027. The gap between 19 percent and 40 percent is what makes the structure interesting.
Take a concrete example. A flat generating £30,000 gross rent a year carries £10,000 of annual mortgage interest, and the landlord already earns £60,000 from employment, so all rental profit falls in the higher-rate band. As a personal landlord under Section 24, the full £30,000 is added to taxable income: £12,000 at 40 percent, minus the £2,000 basic-rate credit on the interest, leaves £10,000 of income tax. Actual profit after the mortgage is £20,000, so the effective rate on real profit is 50 percent.
As an SPV company retaining profit, mortgage interest is deducted in full, so taxable profit is £20,000. Corporation Tax at 19 percent is £3,800. That is an annual saving of £6,200 versus the personal position.
The retaining-profit scenario is what makes the company structure genuinely compelling for landlords building a portfolio. Keeping money inside the company for the next deposit, or drawing it down at retirement when income may be lower, cuts the annual tax bill significantly. Investors who want to grow rather than draw maximum income each year benefit most.
Extracting all profit as dividends tells a different story. From 6 April 2026, the upper dividend rate for higher-rate taxpayers rose from 33.75 percent to 35.75 percent. Running the maths: £3,800 Corporation Tax on £20,000 profit leaves £16,200 to distribute; after the £500 dividend allowance, £15,700 at 35.75 percent adds £5,613 in personal tax. Total £9,413, an annual saving of just £587 versus the personal landlord. That is the April 2026 dividend rate rise in action, narrowing the saving for fully-extracted profit by around £400 to £900 a year.
The transfer barrier: what it actually costs to move existing properties in
This is where most incorporation conversations stall, because moving a property you already own into a company is, in law, a sale at market value that triggers two tax charges immediately. Stamp Duty Land Tax applies to the company as a purchaser, at the standard residential rates plus a 5 percentage point surcharge for additional dwellings. On a £300,000 flat in 2026/27 the company pays roughly £20,000 of SDLT.
Property market value £300,000. SDLT at company higher rates £20,000. CGT on transfer (bought for £180,000 in 2018, now worth £300,000): gain £120,000, minus the £3,000 annual exempt amount, leaves £117,000 taxable. Higher-rate CGT on residential property at 24 percent: £28,080. Add early repayment charges on the personal mortgage if applicable (often £3,000 to £10,000). Combined transfer cost before new mortgage fees: approximately £48,000 to £55,000.
At an annual saving of £587 when extracting all dividends, a £48,000 transfer cost takes over 80 years to recoup. Even at the more favourable £6,200 saving when retaining profit, break-even is approaching eight years. And those figures assume the company mortgage rate matches the personal one, which it does not: company buy-to-let mortgages from specialist lenders typically run 0.5 to 1 percent higher, and on a £250,000 mortgage an extra 0.75 percent costs £1,875 a year, reducing the saving further.
Most landlords with a small existing portfolio (one to three properties, already owned and mortgaged personally) reach the same conclusion when they run it properly: staying personal and optimising within that structure makes more sense than paying to transfer. The company works best for new purchases from scratch.
Personal landlord vs SPV limited company: the key differences
The structures differ on far more than headline tax rate, and the table below shows where each wins. Here is how a personal landlord and an SPV company compare on the factors that actually decide it:
| Factor | Personal landlord | SPV limited company |
|---|---|---|
| Mortgage interest fully deductible | No (Section 24 credit only) | Yes |
| Tax rate on retained profit (higher-rate, 2026/27) | Effective 50%+ with Section 24 | 19% small profits rate |
| MTD ITSA quarterly filing (above £50k gross) | Required from April 2026 | Not applicable |
| Buy-to-let mortgage availability | All major high-street lenders | Specialist lenders, 0.5 to 1% higher |
| Annual accountancy cost (approximate) | From £695 (Self Assessment) | From £1,200 (accounts, CT600, filings) |
| Property income tax rates from April 2027 | 22% / 42% / 47% new bands | 19% CT unchanged |
| Typical break-even on transfer costs | n/a | 5 to 12+ years (scenario-dependent) |
The company wins clearly on ongoing tax, but only new purchases avoid the transfer barrier that decides most existing-portfolio cases.
The April 2027 change that tips the balance on new purchases
From 6 April 2027, property income gets dedicated tax rates in England, Wales and Northern Ireland, and they only move one way. Basic rate on rental profit rises to 22 percent (from 20), higher rate to 42 percent (from 40), and additional rate to 47 percent (from 45). Just as important, the order in which allowances are applied changes: your personal allowance and reliefs are set against employment and trading income first, pushing more rental profit into the upper bands even if your overall income has not changed.
Returning to the same scenario: by 2027/28, with Section 24 still in place, the interest credit becomes 22 percent. Rental income taxed at 42 percent gives £12,600, minus a 22 percent credit on £10,000 (£2,200), leaves £10,400 of income tax, which is £400 more per year than in 2026/27 for the same property. Corporation Tax in the company stays at 19 percent. So from 2027/28 the gap on the retained-profit scenario widens from £6,200 to £6,600 a year on this example. The trend is consistent, and it favours the company on new purchases.
When the numbers actually work in favour of a company
Four situations consistently produce a positive case when we model them for clients considering limited company formation, and none of them involve transferring existing stock.
Buying from scratch, through the company. Clean from day one. No SDLT barrier, no CGT on transfer, no mortgage restructuring. The company buys at today's values, finances at a slightly higher rate, and the 19 percent CT on retained profit works in your favour from the first tax year. For landlords who have not yet bought and plan to grow a portfolio over ten years, this is the straightforward case.
Large portfolios generating significant annual savings. A portfolio with £100,000 of taxable rental profit and £40,000 of mortgage interest tells a very different break-even story. Annual savings in the tens of thousands can justify a seven or eight year pay-back on transfer costs, especially if the properties are held long-term.
Pension funding via employer contributions. A company can make employer pension contributions to a director's scheme, reducing Corporation Tax while building retirement wealth outside the estate. Personal landlords cannot replicate this efficiently, and for a landlord near retirement the pension angle often tips the decision.
Inheritance and estate planning. Property held personally forms part of your estate for Inheritance Tax. Shares in a company offer more flexibility for gifting and succession, though Business Property Relief does not apply to property investment companies, so specialist planning is needed separately. Our tax planning advisory covers estate structure for landlords in detail.
What this means for you
Run the transfer cost calculation before doing anything else. Take each property's current market value, calculate the SDLT at company purchase rates, estimate the CGT on any accrued gain (24 percent for a higher-rate taxpayer on residential property), and compare the total against your projected annual saving. If break-even is more than seven or eight years away, transferring existing stock almost certainly does not make sense on its own.
Do not skip the mortgage conversation. Early repayment charges on your current personal mortgage can add £3,000 to £10,000, and a 0.75 percent higher company rate on a £250,000 balance costs £1,875 a year, extending break-even further. A specialist SPV mortgage broker should run alongside your accountant from the start.
Planning your next purchase is a different calculation entirely: set up the SPV before you buy, buy through the company, and let the 19 percent CT work from day one. The clearest thing to ask for now is a written cash-flow model comparing your personal position year by year from 2027 to 2032 against buying new properties through a company. We produce that in writing within 24 hours of a short call, which is what most landlords want before deciding anything.