Buying property through a limited company: a UK tax guide

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*Disclaimer: The rates referenced in the embedded podcast were correct at the time of recording. However, as of April 2026, these figures have been updated. Please refer to the current rates outlined in the article below for the most up-to-date information.

Despite ongoing tax and regulatory changes affecting the UK property market in the 2026/27 tax year, buy-to-let investment remains a significant part of the UK private rented sector, which has continued to grow steadily for more than a decade. Buy-to-let refers to purchasing a residential property specifically as an investment, with the intention of renting it out to tenants in order to generate rental income, typically using specialist buy-to-let mortgage products that restrict owner occupation.

As landlords face increasing tax pressures and compliance obligations, the way rental properties are owned has become more important than ever. For many higher-rate taxpayers and portfolio landlords, purchasing property through a limited company can improve tax efficiency and help retain more rental profits. However, for some smaller-scale or lower-income investors, the additional setup, accounting and administrative costs may outweigh the potential tax advantages.

This guide explains the key considerations around buying a rental property through a limited company, including when a company structure may be more beneficial than personal ownership and how it can affect long-term investment returns.

Can I buy property through a limited company?

Yes, it is possible to buy property through a limited company. A limited company is its own legal entity and therefore has the ability to own assets, including property. What’s more, when you buy property through a limited company, you will have the protection of limited liability. This means that ordinary loss or legal issues that occur from the property are claimed against the company as opposed to you personally. However, limited liability does not provide protection where you have acted negligently or wrongfully in the course of carrying out company duties.

Why landlords buy property through a limited company?

One of the main reasons behind the increase in landlords purchasing property through a limited company was the introduction of Section 24 of the Finance Act 2015.

Introduced in 2017, Section 24 gradually restricted the ability of individual landlords to deduct mortgage interest from rental income before calculating tax. Instead, landlords now receive a basic rate tax credit of 20%.

Limited companies, however, are not subject to Section 24 restrictions and can still deduct the full cost of mortgage interest as a business expense before paying Corporation Tax. As a result, many landlords began exploring limited company structures to improve profitability and retain more rental income.

This has become increasingly relevant alongside the planned rise in property income tax rates from 6 April 2027. Under the proposed changes, the basic rate for property income will increase to 22% (up from 20%), the higher rate to 42% (up from 40%), and the additional rate to 47% (up from 45%). These increases place further pressure on personally owned buy-to-let property and may encourage more higher-rate taxpayers and portfolio landlords to consider purchasing through a limited company structure.

While tax efficiency is one of the primary drivers, there are several other reasons why landlords may choose to buy property through a limited company.

Tax advantages of a limited company vs personal ownership

Although buying property through a limited company may not benefit all landlords, for many, the tax advantages mean significant savings when compared to buying investment property as an individual. The tax advantages of buying property through a limited company include:

• Being able to claim mortgage interest payments as an allowable expense. As mentioned above, Section 24 does not apply to limited companies. Most landlords who use a mortgage to purchase buy-to-let properties will be repaying interest only. For limited companies, 100% of this cost is treated as a business expense and therefore reduces profits before corporation tax is applied. For individuals however, interest payments are not a tax-deductible expense and instead only 20% of the mortgage interest payments can be claimed as tax credits.
• Paying lower rates of taxation when keeping profits within the company. Individuals are subject to income tax on profits received from rental income, which are planned to go up by two points as of April 2027.  However, limited companies are instead subject to corporation tax. Whilst it may not make much difference to landlords on the basic rate income tax band (20%) compared to limited companies which qualify for Small Profits Rate (19%), there is nevertheless a tax saving. However, when comparing landlords on higher rate income tax band (40%) and additional rate income tax band (45%- 47% in 2027) there becomes a far greater reason to consider using a limited company to purchase rental property. This is because the main corporation tax rate for companies with profits of £250,000 and more is 25%. Companies with profits of between £50,001 and £249,999 can apply Marginal Relief which further reduces their rate of corporation tax. If you’re not planning to extract rental income from the company for personal use, and instead are planning to re-invest in future properties, buying property through a limited company can often be significantly more tax efficient. 
• Having flexibility on how to extract rental profits from your limited company. If you intend to extract rental profits from your limited company for your own personal use, then you will have several options on how to do this. Individuals have no such options as they will simply be taxed on the rental income as income tax. When extracting funds from a limited company however, you’ll have the option to draw either a salary or dividend. Both have their advantages and drawbacks, but a combination of both will usually mean the more tax-efficient outcome. Taking a salary will help reduce your corporation tax and will utilise your personal allowance but will attract NI contributions. Paying dividends offers lower rates of taxation compared to income tax and has its own separate annual dividend allowance for you to utilise; but can only be withdrawn from a company if the company has sufficient funds to do so after corporation tax has been accounted for.  From 6 April 2026, dividend tax rates are 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. Which, compared to income tax rates for unincorporated landlords, is significantly lower and offers a potential tax saving.
• Different tax treatment when disposing of property: When individuals sell their investment property, they’ll be subject to capital gains tax, which is charged at 18% for basic rate income taxpayers and 24% for higher and additional rate income taxpayers. In comparison, companies do not pay capital gains tax, as disposals and transactions such as these are seen as business activities and therefore subject to corporation tax at a flat rate of 25%. The profits will belong to the company, and if you choose to extract instead of reinvesting them, you may also pay personal tax depending on your tax position and how the funds are withdrawn.

Disadvantages of buying property through a limited company

Whilst the tax savings may be attractive, before buying property through a limited company, it’s important to consider the drawbacks as well. The disadvantages to buying property through a limited company compared to buying as an individual include:

• A significant increase to your legal obligations. When you buy property as an individual, you only have to declare your rental income (as well as any other untaxed income) and pay your tax due once a year through a self-assessment tax return. When you’re a director of a limited company, you’ll have to complete your own personal self-assessment tax return for any salary and dividends you receive from the company, as well as complete a corporation tax return, annual accounts, company secretarial, and regular PAYE submissions. In comparison, it is clear that there is significantly more work to be done when you run a limited company. You do not have to do this yourself though if you choose to hire an accountant and their fees are tax-deductible from corporation tax.
• Less mortgage options on the market. If you’re looking to buy investment property with a mortgage, then you’ll likely find that better rates are offered to individuals as opposed to limited companies. There are certainly plenty of lenders who will offer a mortgage to limited companies but it may require finding a mortgage broker to help you ensure that you’ve got the best deal.
• Suffer from double taxation if you withdraw funds from the company. Most landlords buy investment property to receive a return. If you buy property as an individual, all the profits after tax are yours to do with as you choose. When you buy property through a limited company you must extract those profits first before you can do what you like with them, as money within a company must be used for business purposes only. However, when you take money out of a company, either through salary or dividends, it essentially means you’ll need to pay both corporation tax and income tax on the profit earned.
• Prevented from utilising the annual capital gains tax exemption allowance. If you sell a buy-to-let property as an individual, you’ll be liable for capital gains tax if the sale earns you a profit from when you bought the property. However, you can reduce your capital gains tax bill by utilising your annual allowance which is £3,000 for the tax year 2026/27. Limited companies do not receive an annual capital gains tax allowance as they are liable for corporation tax instead on any profits made from the sale of property.
• Very little benefit for basic rate income taxpayers. There are very few tax advantages to buying property as a limited company if you are a basic rate income taxpayer and will remain so even with rental income. We would ordinarily advise that it is not worth doing unless you have long-term plans to buy future investment properties or intend to start a property development business.

How to set up a limited company to buy property

Setting up a limited company to purchase investment property involves more than just incorporating a business. While the process of forming a company is relatively straightforward, the tax treatment, ownership structure, and long-term extraction strategy all need to be considered before proceeding. It is strongly recommended that professional advice is taken before setting up a limited company for property investment, as the structure can have significant implications for income tax, corporation tax, and inheritance tax planning.

Choosing an SPV structure and SIC codes

When setting up a limited company, you will be asked to select one or more SIC codes to describe the nature of the business. These codes are used by Companies House to categorise a company’s activities.

A typical limited company may use a broader range of SIC codes depending on its trading activities. However, where the sole purpose of the company is to hold, buy, or rent out property, landlords often choose to set up what is commonly referred to as a Special Purpose Vehicle (SPV).

An SPV is simply a limited company created for a specific purpose, usually property investment, with its own assets and liabilities that are separate from those of its shareholders and directors. The most commonly used SIC codes for a property investment SPV include:

68100 – Buying and selling of own real estate
68209 – Letting and operating of own or leased real estate
68320 – Management of real estate on a fee or contract basis

Mortgages for a limited company (and how they differ)

When purchasing property through a limited company, lenders will typically assess applications differently compared to personal ownership. One of the main practical differences is the deposit requirement, which is often higher for limited company buy-to-let mortgages.

In most cases, lenders will require a deposit of around 20%–25%, although this can vary depending on the lender, property type, and overall risk profile. This is a general lending consideration rather than a tax or company structuring issue, so professional mortgage advice is usually recommended alongside accountancy advice.

Transferring property you already own into a limited company

If you already own buy-to-let properties as an individual and you’re now considering growing your portfolio, you may be tempted to form a new limited company and then transfer your properties to the company. This should be given careful consideration before doing so as it will attract high amounts of taxes and fees so you need to be sure it will be worthwhile for your long-term plans. We often advise that you should not transfer properties to a newly formed limited company because:

• You’ll need to pay capital gains tax. Remember, even if you are not selling an asset, any disposal (including a gift or transfer of ownership unless to a spouse or civil partner) where the asset increases in value is subject to capital gains tax. This is charged at a rate of 18% for basic rate income taxpayers and 24% for higher and additional rate income taxpayers.
• The company will attract Stamp Duty Land Tax (SDLT). This is because the company has acquired property and even where no money has been exchanged, SDLT will be charged on the property’s value. Furthermore, the company will suffer the 5% additional surcharge on residential properties.  
• You’ll have to pay for conveyancing and legal fees again. You would have needed to pay for these when you first purchased the property as an individual. To ensure the transfer of deeds is accurately completed into the name of the company, you’ll have to pay for these fees once again.
• May be required to pay early redemption charges on your buy-to-let mortgage. If your investment property has been purchased with a buy-to-let mortgage, then you’ll have to repay it in full before transferring it over to the company’s mortgage provider. If you are within your early repayment period, then there’ll be redemption charges to pay for. It would make most sense to wait, where possible, for this period to end before making a transfer.
• Incorporation Relief may be available in limited circumstances where a genuine property business is transferred into a company, although strict conditions apply.

Gifting property to a limited company

Yes, it is possible to gift property to a limited company, however this will typically trigger a number of tax, legal, and conveyancing implications. For tax purposes, the transfer is generally treated as a disposal at market value, which may result in a Capital Gains Tax (CGT) liability for the individual making the transfer.

In addition, Stamp Duty Land Tax (SDLT) is usually payable by the company acquiring the property, even where no cash consideration is exchanged, based on the market value of the asset.

If the property is subject to a mortgage, lender consent will also be required and the loan may need to be repaid or refinanced as part of the transfer process. Given the tax and legal complexity involved, professional advice should always be sought before proceeding.

Frequently asked questions

Get help with setting up a company to buy investment property

If you have long-term plans to build an investment property business, then it can make much more sense to do so through a limited company. Discuss your intentions and plans with us so that we can devise the most tax-efficient strategy in helping you achieve your goals. We can provide a line-by-line quote to include everything from company formation, corporation tax return submission, annual accounts, self-assessment tax return, and more. Or you can pick and choose from our range of services and just get the help that you need. Get in touch through our online contact form.