Limited Company vs Personal Buy-to-Let: Which is Better for UK Landlords in 2026?

Since Section 24 was fully phased in from April 2020, more UK landlords than ever have weighed up holding buy-to-let property through a limited company. Around two-thirds of new BTL mortgages in 2024 went to limited companies. But limited company isn't automatically better — the structure has higher mortgage rates, more admin, and tax on extraction. This guide walks through the trade-offs in 2026 so you can decide for your portfolio.

The headline tax treatment

Here's how the two structures compare at a glance:

How Section 24 changes the calculation

Section 24 is the main reason most landlords now consider Ltd Co. Personal landlords can no longer deduct mortgage interest as an expense — they receive only a 20% basic-rate tax credit instead. For higher-rate taxpayers this roughly doubles the effective cost of borrowing. Limited companies are exempt: interest is still deductible as a normal business expense.

For a full walk-through of how Section 24 works, including worked examples, see our Section 24 guide.

Corporation Tax vs Income Tax — the maths

Limited companies pay Corporation Tax on profits at:

• 19% small profits rate — for profits up to £50,000
• 25% main rate — for profits over £250,000
• Marginal rate between £50k and £250k (effective rate gradually rises from 19% to 25%)

Personal landlords pay income tax at marginal rates: 0% personal allowance (£12,570), 20% basic rate (to £50,270), 40% higher rate (to £125,140), 45% additional rate above. Add Section 24's restriction and personal landlords on the higher band often pay an effective 40%+ on rental profits that a Ltd Co would tax at 19–25%.

Dividend tax — the catch with Ltd Co

The flip side of Ltd Co is that money in the company isn't your money yet. To get it into your personal bank account you either:

• Take a small salary (typically up to the NI threshold, around £12,570)
• Take dividends, taxed at 8.75% (basic), 33.75% (higher) or 39.35% (additional rate) after a £500 dividend allowance (2026/27)
• Take a director's loan (must be repaid or it becomes income)
• Leave the profits in the company for reinvestment (no further tax until you extract)

So a higher-rate taxpayer extracting £30,000 of profit pays:

• 25% Corporation Tax (on the marginal slice) — leaving ~£22,500
• 33.75% dividend tax on that £22,500 — leaving ~£14,900
• Effective combined rate: ~50% — actually worse than personal ownership in some scenarios

SDLT — both structures pay the 3% surcharge

Many landlords mistakenly believe limited companies escape the 3% additional-rate SDLT surcharge. They don't. Companies pay:

• Standard residential SDLT rates, plus 3% on every band — even the company's first property
• For properties over £500,000 owned by "non-natural persons" (companies, partnerships including companies, collective investment schemes), a flat 15% rate may apply unless the property is acquired for a qualifying purpose (e.g. let to unconnected third party)

So SDLT is broadly the same between Ltd and personal for additional properties. The structures don't differ on this point.

Mortgage availability and rates

Limited company BTL mortgages are now a major market — but they're not the same as personal BTL:

• Higher rates: typically 0.5–1.5% above equivalent personal BTL rates
• Higher fees: arrangement fees of 2–3% of loan are common
• Personal guarantee: almost always required from each director
• SPV preference: most lenders require a Special Purpose Vehicle (SPV) Ltd Co with specific property-only SIC codes
• Fewer lenders: the panel is smaller — though growing

Administrative cost

A limited company is more work than personal ownership:

• Annual accounts filed with Companies House (typically £400–£1,200/year for an accountant)
• Corporation Tax return (CT600) to HMRC
• Confirmation Statement filed annually with Companies House (£34 + accountant time)
• Director's responsibilities — fiduciary duties, record-keeping, statutory registers
• Bookkeeping must be separate from personal — dedicated bank account, accounting software

Personal landlords above the MTD ITSA threshold (£50k from April 2026) must also file digital quarterly updates. See our MTD ITSA guide.

When does incorporation make sense?

There's no universal answer, but here are the rough indicators that incorporation may pay off:

• You're a higher-rate or additional-rate income taxpayer (combined income over £50,270)
• You have meaningful mortgage borrowing (Section 24 only stings when you have interest costs)
• You plan to reinvest profits to grow the portfolio, not extract for living costs
• You're buying new properties — not transferring existing ones
• You expect to hold long-term (the up-front Ltd Co costs need years to amortise)

Indicators that personal ownership is probably still best:

• You're a basic-rate taxpayer (Section 24 doesn't hurt you)
• You only have 1–2 unmortgaged properties
• You rely on rental income for day-to-day living
• You're planning to sell within a few years (CGT treatment is simpler personally)

How to set up an SPV limited company

If you've decided to incorporate, here's the process:

1. Choose a company name — usually something neutral like "Smith Property Holdings Ltd". Avoid suggesting regulated activities
2. Decide on shareholders and directors — typically you (and spouse, for income splitting). Ordinary shares are usual; alphabet shares enable flexible dividend split
3. Register with Companies House — costs £50 online (£12 paper). Choose the right SIC codes: 68100 (buying/selling), 68201 (own/managed real estate), 68209 (other letting), 68320 (management of real estate)
4. Open a business bank account — most challenger banks (Tide, Starling, Allica) onboard property SPVs in days; high street banks can take weeks
5. Register for Corporation Tax — HMRC will send a UTR after Companies House registration; activate it
6. Appoint an accountant — Ltd Co tax is harder than Self Assessment. Property-specialist accountants exist
7. Apply for Ltd Co BTL mortgage — start before you've found the property; brokers and lenders need to verify the SPV

Transferring existing property into a Ltd Co

This is where it gets expensive. Moving a property you already own personally into a Ltd Co counts as a disposal at market value:

• You pay CGT on the personal gain (18% or 24% in 2026 for residential)
• The company pays SDLT at residential rates plus 3% surcharge
• Your existing personal mortgage must be redeemed and replaced with Ltd Co BTL (early repayment charges may apply)
• You'll need new mortgage arrangement fees, legal fees, valuation fees

For a 5-property portfolio, the total cost of incorporation can easily exceed £50,000 — equivalent to 5+ years of Section 24 savings. Incorporation Relief under s162 TCGA can defer the CGT if you can demonstrate you run a property business (HMRC typically looks for 20+ hours/week of active management). It's a high bar — take advice.

Worked example — when does Ltd Co win?

Personal ownership:

• Taxable rental profit (no interest deduction): £14,400 − £2,000 = £12,400
• Income tax at 40%: £4,960
• Less 20% finance cost credit on £8,250: −£1,650
• Net income tax on rental: £3,310
• Cash profit after tax: £14,400 − £8,250 − £2,000 − £3,310 = £840

Limited company ownership (reinvested, not extracted):

• Company profit: £14,400 − £8,250 − £2,000 = £4,150
• Corporation Tax at 19%: £789
• Cash retained in company: £3,361

The Ltd Co retains 4x more cash for reinvestment per property per year. But if the landlord extracts that £3,361 as dividends (33.75% higher-rate dividend rate), they net £2,228 — still better than personal £840, but not as dramatic.

Other things to consider

Inheritance tax

Property held personally is in your estate at full market value for IHT (40% above the nil-rate band). Limited company shares can be structured (e.g. with multiple shareholders, trusts, or specific share classes) for more efficient succession planning — but this needs specialist advice and isn't a magic IHT solution.

Pensions and PEnsioner thresholds

Personal rental income counts as "non-relevant earnings" and doesn't increase pension annual allowance. Salaries paid by your Ltd Co do — useful for tax-efficient pension contributions through the company.

Future legislation risk

HMRC has signalled it's watching the explosion of Ltd Co BTL. Future budgets could narrow the gap — for example by extending Section 24-type rules to companies, or restricting Corporation Tax small profits rate for investment companies. Don't assume current treatment will last forever.

How OwnProperly Helps

If you've gone hybrid — some properties personal, some in an SPV — OwnProperly lets you track each entity separately while seeing the consolidated view of cash flow, mortgage interest, expenses and tax position. It also calculates the personal/Ltd Co indicator on each property so you can model what an additional purchase would look like under each structure.

Related guides: Section 24 explained, How to analyse a BTL deal, MTD ITSA guide.

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