For a higher-rate taxpayer with a mortgage, buying through a limited company usually means less tax each year, because the company deducts all its interest and pays corporation tax at 19% on modest profits. The gap is widest when you leave the profit in the company to buy more property. Once you take the money out as dividends, a second layer of tax applies and the saving narrows. Higher mortgage costs, extra admin and the rules for dwellings over £500,000 can cancel it out altogether. Basic-rate taxpayers and anyone who needs the rental income to live on often do better owning personally.
This guide is about new purchases. Moving properties you already own into a company is a different exercise, with capital gains tax and stamp duty on the transfer itself. See our separate guide to incorporating a property portfolio.
Owning in your own name
Rental profit is added to your other income and taxed at your income tax rates. For 2026/27 that means 20%, 40% or 45% in England, Wales and Northern Ireland, with a £12,570 personal allowance that is withdrawn above £100,000.
Since 2020/21, individuals cannot deduct mortgage interest on residential lets when working out rental profit (section 272A of the Income Tax (Trading and Other Income) Act 2005). Instead you get a tax reduction at the basic rate, 20% for 2026/27. It is worked out on the lowest of your finance costs, your property profits and your non-savings income above the personal allowance. Any interest that misses out is carried forward. For a higher-rate taxpayer, that means rent used to pay interest is still taxed at 40%, with only 20% given back.
From 6 April 2027, rental profits get their own rates under Finance Act 2026: 22%, 42% and 47% for taxpayers in England and Northern Ireland. Scottish and Welsh taxpayers will pay property rates set by the Scottish Parliament and the Senedd. The finance cost reduction moves to the new property basic rate of 22%, so it rises slightly too. Our guide to the April 2027 property income tax rates explains the detail.
When you sell, any gain on a residential property is taxed at 18% within the basic rate band and 24% above it, after the £3,000 annual exempt amount.
Owning through a limited company
A company pays corporation tax on its rental profit. The interest restriction does not apply to companies, so mortgage interest is deducted in full. For the financial year that began on 1 April 2026, the rate is 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between, which works out at an effective 26.5% on profit in that band. Those limits are shared out if the company has associated companies, for example a trading company you also control. Finance Act 2026 has already fixed the same rates and fraction for the year starting 1 April 2027.
A company letting to unconnected tenants is not a close investment-holding company, so it can use the 19% rate. Letting to yourself or relatives can change that.
The catch is getting money out. Dividends above the £500 dividend allowance are taxed at 10.75%, 35.75% or 39.35% for 2026/27. So a company suits investors who can leave the profit inside to repay debt or buy the next property. Gains on a sale are also taxed in the company, as part of its profits for corporation tax, and a second tax charge follows when the proceeds reach you.
Stamp duty, ATED and running costs
Stamp duty land tax. In England and Northern Ireland, a company pays the 5% higher rates surcharge on every residential purchase of £40,000 or more, even its first. Most individuals buying a buy-to-let already own their home, so they pay the surcharge too. On a £300,000 flat the bill is £20,000 either way. On a dwelling over £500,000, a company can face a flat 17% rate instead, unless a relief applies. Relief is available for property used in a property rental business, but its conditions must be met and it can be withdrawn later. See our guide to stamp duty for property investors. Scotland and Wales have their own taxes.
ATED. A company owning a UK dwelling worth over £500,000 falls within the annual tax on enveloped dwellings. The 2026/27 charge starts at £4,600 a year for a value up to £1 million. Commercial letting to unconnected tenants qualifies for relief, but you must still file a Relief Declaration Return, normally by 30 April each year, or within 30 days of buying. Missing it can lead to penalties even when no tax is due.
Running costs. Buy-to-let mortgages for companies often carry higher rates and fees, and lenders often ask for personal guarantees. The company needs annual accounts, a corporation tax return and a confirmation statement. These costs are deductible but still eat into the saving.
Worked example: a higher-rate taxpayer buying one property
Daniel earns a salary of £60,000, which uses all of his basic rate band. He buys a flat in England with rent of £30,000 a year after letting and running costs, and pays £12,000 of mortgage interest. We assume the company has no associated companies and ignore its extra running costs and any difference in mortgage rates.
| 2026/27 | Personal | Company, profit retained | Company, all paid out |
|---|---|---|---|
| Profit before interest | £30,000 | £30,000 | £30,000 |
| Interest | Not deductible | (£12,000) | (£12,000) |
| Tax on profit | £30,000 × 40% = £12,000 | £18,000 × 19% = £3,420 | £3,420 |
| Finance cost reduction | £12,000 × 20% = (£2,400) | None | None |
| Dividend tax | None | None | £14,080 × 35.75% = £5,034 |
| Total tax | £9,600 | £3,420 | £8,454 |
| Cash left after interest and tax | £8,400 | £14,580 (in the company) | £9,546 (in Daniel's hands) |
The dividend is the company's full post-tax profit of £14,580. The first £500 falls within the dividend allowance.
In 2027/28, the personal figure gets worse: £30,000 at 42% is £12,600, less a £2,640 finance cost reduction at 22%, giving tax of £9,960 and £8,040 of cash. The company figures stay the same, because the 19% rate is already set and no change to dividend rates has been legislated. The company's advantage on full extraction therefore grows from about £1,150 to about £1,500 a year, before its extra costs. Pay one or two percentage points more on a £300,000 company mortgage and that advantage can disappear.
Inheritance tax and passing it on
Shares are easier to pass on in stages than bricks and mortar. You can give some shares to children over time, or set up different share classes so that future growth sits with the next generation while you keep control. This is the idea behind a family investment company. A gift of shares to anyone other than a spouse or civil partner can still trigger capital gains tax, and it only falls outside your estate after seven years. The settlements rules also apply: if you give shares to your own child under 18, dividends on them above £100 a year are taxed as your income, and shares that carry little more than a right to dividends cannot safely be used to move income to a spouse.
Shares in a company that mainly holds let property do not qualify for business relief, so on death they count in your estate at full value, much like the property would. For more on gifting property, see our guide to passing property to children.
Which suits you
- A company often suits higher and additional-rate taxpayers with significant borrowing who plan to reinvest the profit, build a portfolio over many years, or pass value to the next generation.
- Personal ownership often suits basic-rate taxpayers, investors with little or no mortgage, people who need the rental income now, and those planning to sell within a few years.
- Either way, the mortgage offer often decides it. Get company and personal quotes before you choose.
The Autumn Budget on 28 October 2026 could change any of these rates. The figures above are the ones legislated today.
What to do now
- Work out which tax band your rental profit will fall into in 2026/27 and 2027/28.
- Decide whether you need the income now or can leave it to build up.
- Get mortgage quotes for both personal and company ownership, including fees.
- Check whether you have other companies that would be associated with a new one.
- For any property over £500,000, plan the stamp duty relief claim and ATED returns before you exchange.
- Think about who will own the property, or the shares, in 20 years.
Read more about our property incorporation work and how we help landlords. To model your own purchase with a Chartered Tax Advisor before you commit, book a consultation.
This article is general information about UK tax, based on the law and HMRC practice at the date shown above. It is not advice, and reading it does not make you our client. Tax rules change and their effect depends on your circumstances, so please speak to us before acting on it.