Holding Property in a Limited Company – Smart Move or Tax Trap?
Thinking about putting your buy-to-let portfolio into a limited company? You’re not alone. With shifting tax rules and everchanging costs, many landlords are exploring whether incorporation could save money - or cause a costly headache. In this guide, we break down the pros, cons, and key differences you need to know.
The question of whether to hold your buy-to-let properties in a limited company or in your personal name has become increasingly relevant in recent years—especially following the phased removal of mortgage interest tax relief for individual landlords. As tax rules and property investment strategies evolve, it's essential to weigh up the pros and cons of the limited company route.
In this blog, we’ll look at the advantages and disadvantages of using a limited company structure for buy-to-let, and importantly, we’ll also compare buying property directly into a company versus transferring existing properties from personal ownership.
First of all, some facts...
Record Year for Incorporations: A record 61,517 new limited companies were set up in 2024, a 23% increase on what had previously been a record set in 2023 of 50,004.
Growth in Smaller Landlord Companies: The growth in buy-to-let incorporations was particularly noticeable among smaller landlords, with a 22% increase in the number of companies holding a single property.
Total Active Companies: There are around 680,000 buy-to-let properties held in a limited company structure across England & Wales, with the number rising by 70,000 to 100,000 annually.
Why Consider a Limited Company?
A limited company is a separate legal entity from you as an individual. When you purchase a property through a limited company, it is owned by the company - not you personally. This separation comes with tax and legal implications, both good and bad.
Pros of Using a Limited Company
1. Tax Efficiency
Corporation tax on profits is currently lower (at 19% or 25% depending on profits) than the higher and additional rates of income tax.
You can retain profits in the company to reinvest without drawing them as income.
Mortgage interest is fully deductible for companies, unlike for individuals, where relief is now limited to a basic rate tax credit.
2. Estate Planning Benefits
Shares in a company can be passed on more flexibly than property itself.
This can offer inheritance tax planning opportunities, though advice should always be taken from a specialist.
3. Limited Personal Liability
The company takes on legal responsibility for the property and associated risks.
Directors and shareholders usually have limited liability, depending on guarantees.
4. Professional Image & Structure
A company can enhance credibility with lenders, joint venture partners, and even tenants.
It is easier to create joint ownership structures via shares.
Cons of Using a Limited Company
1. Higher Mortgage Rates and Fewer Lenders
Limited company mortgage products often come with higher interest rates and fees.
The number of lenders in this space is smaller, and criteria can be stricter.
2. Additional Administration and Costs
Annual accounts, company tax returns, and compliance with Companies House regulations.
Often requires an accountant, adding to costs.
3. Dividend Tax
Once you extract profits from the company, you’ll pay dividend tax on top of corporation tax.
This can reduce the tax benefit for landlords who want to live off their rental income.
4. Reduced CGT Allowances
Companies do not benefit from Capital Gains Tax (CGT) allowances in the same way individuals do.
Any disposal of property can result in a larger overall tax liability when profits are ultimately extracted.
Buying into a Company vs. Transferring Existing Properties
This is a key distinction—how you structure your portfolio from the start can significantly impact your tax and financial situation.
Buying Property Directly into a Limited Company
Pros:
No Stamp Duty Land Tax (SDLT) complications beyond the standard purchase.
No Capital Gains Tax on transfer because there is no transfer—it’s a new acquisition.
Clean start with company accounting and mortgage setup.
Cons:
Mortgage products may be more expensive than personal BTL mortgages.
You may need to personally guarantee loans made to the company.
Best For:
New investors or those expanding their portfolio who want to start with a clean, tax-efficient structure.
Transferring Personally Owned Property to a Limited Company
Pros:
Future profits are taxed more efficiently under the company structure.
Over time, you may build a better legacy or estate planning position.
Cons:
Stamp Duty Land Tax (SDLT) is payable on the market value of the property—even though you already own it.
Capital Gains Tax (CGT) may apply based on the gain from your original purchase price to today’s value.
The company is a separate legal entity, so this is treated as a sale to a third party.
Mortgage complications: You must remortgage in the company’s name, often with higher rates.
Possible Relief: If you can demonstrate the property is part of a “genuine business” (i.e. you’re running it full time, managing multiple properties, etc.), Incorporation Relief under Section 162 of TCGA 1992 may apply. This defers CGT but does not eliminate SDLT.
Best For:
Landlords with substantial portfolios and a strong business case, especially those running their letting operation full-time.
Key Questions to Ask Yourself
Are you planning to reinvest profits or live off the income?
If reinvesting, a company might be more tax-efficient.
If drawing income regularly, personal ownership may still work.
What is your current and future tax position?
Higher-rate taxpayers often benefit more from company ownership.
How many properties do you own or plan to own?
Larger portfolios can justify the setup and admin costs of a company.
Do you plan to pass your portfolio to family members?
Limited companies offer more flexible succession planning.
Final Thoughts
Setting up a limited company to own buy-to-let property can offer significant tax advantages, especially for higher-rate taxpayers or those planning to grow and reinvest their portfolio. However, it's not a one-size-fits-all solution.
The initial tax costs of transferring property into a company can be high and must be carefully weighed against future tax savings. If you’re just starting out, buying through a company from day one may make more sense. But if you already own property personally, consider the long-term goals, tax implications, and costs before restructuring.
Professional tax advice is essential.
This blog is for guidance only - I am not a qualified tax accountant! A property accountant can run projections based on your specific circumstances to help you make the right decision.
Need help navigating this decision?
Our lettings and portfolio management team can connect you with trusted tax advisors and mortgage brokers who specialise in buy-to-let companies. Get in touch today to discuss how we can support your investment goals.
