Limited companies for landlords

If you own rental property, you’ve probably heard about the tax benefits of running your properties through a limited company. The rise in landlords choosing this structure has been dramatic since tax rules changed in 2017, but understanding whether it suits your situation requires careful consideration. Let’s break down what setting up a limited company for landlords really means and help you decide if it’s the right path forward.

Why landlords are choosing limited companies

The numbers tell a compelling story. There are now over 390,000 buy-to-let companies operating in the UK [1], with approximately 680,000 properties held in limited company structures across England and Wales [2]. This represents more than a 300% increase since mortgage interest tax relief changes began in 2016 [2].

This surge stems primarily from Section 24 of the Finance (No.2) Act 2015 [3]. This legislation removed the ability for private landlords to deduct mortgage interest from rental income before calculating tax. Instead, individual landlords now receive only a 20% tax credit on mortgage interest payments. For higher-rate taxpayers paying 40% or 45% income tax, this change significantly reduced their take-home profits.

Limited companies, however, aren’t affected by Section 24. They can still deduct mortgage interest as a business expense before calculating corporation tax, which ranges from 19% to 25% depending on profit levels [4]. For higher-rate taxpayers with substantial mortgage costs, the savings can be considerable.

The financial benefits of a limited company for landlords

Corporation tax rates remain significantly lower than higher-rate income tax. Limited companies with profits under £50,000 pay just 19% corporation tax, whilst companies earning between £50,000 and £250,000 benefit from marginal relief. Compare this to the 40% or 45% income tax rates faced by higher-earning individual landlords, and the appeal becomes clear.

Beyond the immediate tax savings, limited companies offer flexibility in how you extract profits. You can leave profits within the company to reinvest in additional properties without triggering personal tax. When you do withdraw money, you have options: take a small salary to maintain your National Insurance record, then draw dividends which are taxed at lower rates than employment income.

Understanding the costs and complexity

Setting up a limited company for landlords isn’t free, so think carefully about this over the medium to long term. You’ll face Companies House registration fees, accountancy costs (typically £600-£2,000 annually for property companies), and potentially higher mortgage interest rates. Limited company buy-to-let mortgages often carry rates approximately 0.3-0.5% higher than personal mortgages, and deposit requirements tend to be larger, typically 25% minimum.

The administrative burden increases too. You’ll need to maintain proper company records, file annual accounts with Companies House, submit corporation tax returns to HMRC, and comply with Making Tax Digital requirements. Whilst these tasks aren’t insurmountable, they do require time and organisation or the cost of professional support.

When a limited company makes sense

Limited company structures work best for specific landlord profiles. You’ll likely benefit if you’re a higher-rate taxpayer (earning over £50,270 annually), planning to expand your property portfolio, have substantial mortgage costs on your properties, or want to retain profits for reinvestment rather than drawing income immediately.

Succession planning becomes simpler too. Transferring shares in a company is generally more straightforward than transferring property directly, offering potential inheritance tax advantages. If you’re building a portfolio to pass on to family members, a company structure may provide flexibility that personal ownership doesn’t.

However, if you’re a basic-rate taxpayer with one or two properties and you need to draw most rental income for living expenses, a limited company probably won’t offer significant advantages. The setup and running costs might actually leave you worse off.

The transfer trap

If you already own properties personally, transferring them into a limited company creates immediate tax bills. You’ll face capital gains tax on any increase in property value since purchase, plus stamp duty land tax on the transfer. These costs can be substantial and might take years of tax savings to recover.

For this reason, most accountants advise keeping existing personal properties as they are and purchasing future properties through a new limited company structure. This approach avoids transfer costs whilst still capturing the tax benefits for new acquisitions.

Making the decision

The question isn’t whether limited companies save tax for landlords in general, but whether they save tax for your specific situation. Consider your current income level, property portfolio size, mortgage costs, future expansion plans, and how much rental income you need to withdraw.

Research from Hamptons shows that 70-75% of new buy-to-let purchases now go into company structures [1], with the trend particularly strong among younger investors. However, recent changes including the increased stamp duty surcharge to 5% may slow this growth in the short term.

Before making any decisions, run the numbers based on your actual situation. Your accountant can model different scenarios showing the tax position under personal ownership versus a limited company structure, helping you make an informed choice rather than following the crowd.

Setting up a limited company for landlords

If you’ve decided a limited company suits your circumstances, the setup process is relatively straightforward. Register your company with Companies House (typically using SIC code 68209 for property rental), verify your Companies House ID, open a business bank account, register for corporation tax with HMRC, and implement proper bookkeeping systems compliant with Making Tax Digital.

Many landlords find working with a mortgage broker who specialises in limited company buy-to-let essential. These specialists understand lender requirements and can navigate the stricter underwriting criteria that company applications face.

Setting up a limited company for landlords can offer substantial tax savings, but it’s not a universal solution. The benefits depend entirely on your tax bracket, portfolio size, financing structure, and long-term plans. Don’t let tax considerations override sound investment decisions, but equally, don’t ignore legitimate opportunities to structure your property business more efficiently.

Need help working out whether a limited company structure would benefit your property portfolio?

Contact Adams Accountancy for a free consultation. We can review your current position and help you understand the actual numbers rather than general rules of thumb.

About the author

Michelle Adams is a qualified accountant and director at Adams Accountancy, a friendly accountancy practice based in Dartford, Kent. Adams Accountancy provides comprehensive accounting services including tax returns, business advisory, and property tax planning to landlords and property investors throughout Kent and beyond. For expert advice tailored to your situation, contact Michelle and her team for a free, no-obligation chat.

Frequently asked questions

Is it worth setting up a limited company for one rental property?

Generally not, unless you’re a higher-rate taxpayer with significant mortgage costs. The annual accountancy fees (£600-£2,000) and administrative burden typically outweigh the tax savings for single-property landlords. Basic-rate taxpayers with modest portfolios usually find personal ownership more straightforward and cost-effective.

Can I transfer my existing rental properties into a limited company?

Yes, but it’s expensive. Transferring property from personal ownership to a limited company triggers capital gains tax on any increase in value plus stamp duty land tax on the transfer. Most accountants recommend keeping existing properties in your personal name and buying future properties through a new limited company to avoid these transfer costs. Check out our recent blog about LLP property schemes which should be avoided.

Do I still pay income tax if I own property through a limited company?

The company pays corporation tax (19-25%) on rental profits, not income tax. However, when you withdraw money from the company as salary or dividends, you’ll pay personal income tax on those withdrawals. The key advantage is you can leave profits in the company for reinvestment without triggering immediate personal tax.

How much does it cost to run a limited company for rental properties?

Expect annual costs of £800-£2,500 including accountancy fees (£600-£2,000), Companies House filing fees (£34 for confirmation statement), and potentially higher mortgage interest rates. Setup costs include company registration, legal fees, and potentially mortgage arrangement fees, totalling £1,000-£3,000 initially.

Will mortgage lenders lend to my limited company?

Yes, but fewer lenders offer limited company mortgages and rates are typically 0.3-0.5% higher than personal buy-to-let mortgages. You’ll also need larger deposits (usually 25% minimum) and face stricter underwriting criteria. Working with a specialist limited company mortgage broker significantly improves your chances of finding competitive deals.

References

[1] Hamptons (2025). Record number of companies set up to hold buy to let property in 2024. Available at:
https://www.hamptons.co.uk/articles/record-number-of-companies-set-up-to-hold-buy-to-let-property-in-2024

[2] Buy Association (2025). Limited companies for buy-to-let hit record high in 2025. Available at:
https://www.buyassociationgroup.com/en-gb/news/limited-companies-buytolet/

[3] House of Commons Library (2015). Tax relief on landlords’ finance costs: s24 of Finance (No.2) Act 2015. Available at:
https://commonslibrary.parliament.uk/research-briefings/sn06361/

[4] GOV.UK (2017). Restricting finance cost relief for individual landlords. Available at:
https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords

[5] Landlord Advice UK (2025). Individual vs Limited Company: Which is the Better Tax Structure for Buy-to-Let in 2025/26? Available at:
https://landlordadvice.co.uk/individual-vs-limited-company-which-is-the-better-tax-structure-for-buy-to-let-in-2025-26/

[6] Simply Business (2024). What is Section 24? How tax relief changes affect landlords. Available at:
https://www.simplybusiness.co.uk/knowledge/landlord-tax/what-is-section-24/