Many landlords now buy rental property through a limited company rather than in their own name, largely because of tax changes. But it is not right for everyone. This guide explains limited company buy-to-let: what it is, why landlords use it, the costs and trade-offs, and when it tends to make sense.
What it means
Limited company buy-to-let means buying and holding rental property through a company, often a special purpose vehicle set up just for property, rather than in your own name. The company owns the property and takes out the mortgage, and you own the company. This structure changes how the rental income and mortgage interest are taxed, which is the main reason landlords consider it, as our guide to tax on buy-to-let explains.
Why landlords use it
The key attraction is tax. Within a company, mortgage interest remains fully deductible against rental income, unlike for individual landlords who only get a 20% credit. Profits are taxed at corporation tax rates rather than your personal income tax rate. For higher-rate taxpayers especially, this can mean a better after-tax position, which is why company structures have grown rapidly since the interest relief restriction took effect.
Easier rental cover
Company borrowers are usually assessed at the lower 125% interest cover ratio, like basic-rate taxpayers, rather than the 145% applied to higher-rate individual landlords, as our guide to rental cover and the stress test explains. This can allow a company to borrow more against the same rent than a higher-rate taxpayer borrowing personally, which is another reason the structure appeals to some landlords.
The rate premium and fees
Limited company buy-to-let mortgages usually come with higher interest rates and arrangement fees than personal buy-to-let deals, often a noticeable premium. This rate premium offsets some of the tax benefit, so the company route is not automatically cheaper overall. Weighing the higher borrowing cost against the tax saving is central to deciding whether a company structure leaves you better off in practice.
Corporation tax and extracting profits
A company pays corporation tax on its rental profits, which can be lower than higher personal tax rates, but getting the money out of the company, as salary or dividends, can trigger further personal tax. So the company structure can defer or reduce tax while profits stay in the company, but extracting them has its own tax cost. This is why the benefit depends heavily on your circumstances and plans.
Costs and complexity
Running a company adds cost and complexity: setting it up, filing company accounts and returns, and usually paying for an accountant. There are also considerations if you move existing personally owned properties into a company, which can trigger stamp duty and capital gains tax. These costs and complications mean the company route suits those with enough scale or tax benefit to justify them, rather than every landlord.
When it makes sense
Broadly, a limited company tends to make more sense for higher-rate taxpayers, those building a larger portfolio, and those with higher property profits, where the tax benefit outweighs the costs and rate premium. For basic-rate taxpayers or small-scale landlords, holding personally is often simpler and just as good. Because it depends so much on individual circumstances, specialist tax advice is strongly recommended before choosing a structure.
Setting up a company
Landlords using this route typically set up a limited company, often a special purpose vehicle whose sole activity is holding property, with the right activity codes that lenders recognise. Setting it up is straightforward and inexpensive, but running it brings ongoing duties. The company then buys and owns the property and takes the mortgage, with you as the shareholder and usually director, which is the structure lenders assess.
Mortgages for companies
A growing number of lenders offer buy-to-let mortgages to limited companies, though the choice is narrower than for personal buy-to-let and rates are usually higher. Lenders often require personal guarantees from the directors, meaning you remain personally responsible if the company cannot pay. So while the company owns the property, you are not fully insulated from the borrowing, which is an important point to understand before choosing this route.
Moving existing properties in
Landlords who already own properties personally sometimes consider moving them into a company, but this is treated as a sale to the company, which can trigger stamp duty and capital gains tax, as our guide to buy-to-let stamp duty explains. These costs can be significant, so transferring existing properties is rarely straightforward and needs careful tax advice to weigh against the ongoing benefits.
Succession and longer-term planning
Some landlords favour a company structure for longer-term and succession planning, as shares in a property company can be easier to pass on than individual properties, potentially helping with inheritance planning. This is a specialist area with its own rules and pitfalls, so it should only be pursued with professional advice. It is, however, one of the wider reasons some landlords look beyond the immediate tax position to a company.
Weighing it all up
Deciding between personal and company ownership means weighing the tax benefits against the higher mortgage rates, the running costs, and the complexity, all in light of your income, portfolio size and plans. There is no universal answer: companies often suit higher-rate taxpayers and larger portfolios, while personal ownership suits smaller, basic-rate situations. Because so much depends on your circumstances, individual tax advice is essential before committing to a structure.
Not a one-size-fits-all answer
It is worth stressing that a limited company is not automatically the right choice, despite its popularity. The higher mortgage rates, running costs and complexity can outweigh the tax benefit for smaller or basic-rate landlords. The structure tends to reward higher-rate taxpayers building a sizeable portfolio over the long term. For a single property held by a basic-rate taxpayer, personal ownership is often simpler and no worse, or better, after costs.
Because the decision turns on your income, plans, portfolio and the figures, it is one to make with a qualified tax adviser rather than by following the crowd, so that whichever route you choose genuinely suits your circumstances rather than simply matching what other landlords are doing.
If you are seriously weighing a company structure, get tailored figures comparing personal and company ownership for your own situation, including the rate premium, running costs and your tax position, so the decision rests on real numbers rather than the general impression that companies are simply better.
Make the choice on tailored figures and sound advice, and whichever structure you land on will be the one that genuinely fits your circumstances.
In short
Limited company buy-to-let means holding rental property through a company, which keeps mortgage interest fully deductible and taxes profits at corporation tax rates, often benefiting higher-rate taxpayers and larger portfolios. Companies are usually assessed at the easier 125% rental cover ratio but pay higher mortgage rates and fees, plus the cost and complexity of running a company. It suits some landlords but not all, so take tax advice.
Where to get help and next steps
Read our guides to buy-to-let tax and buy-to-let rental cover. This is general information, not tax, mortgage or financial advice; consider speaking to a qualified tax adviser.