Published: June 2026 | Fact-Checked & Audited By: David Vance, CTA FCA (Chartered Tax Advisor & Accountant)
This guide is fully updated for the 2026/27 HMRC tax year. All calculations and tax rules have been audited against official UK legislation.
Investing in UK residential property remains a popular path to wealth, but the tax landscape has become significantly less friendly for individual landlords. The restriction of mortgage interest relief (Section 24) has forced property investors to choose between holding properties in their personal name or using a corporate wrapper (a Special Purpose Vehicle or SPV limited company). In this guide, we compare the tax structures of limited company vs. personal property investing for the 2026/27 tax year.
The Core Conflict: Section 24 Interest Relief
For individual landlords, mortgage interest is no longer a deductible business expense. Instead, you receive a flat 20% tax credit. If you are a higher-rate (40%) or additional-rate (45%) taxpayer, this means you are taxed on your gross rental income before interest costs, which can result in tax liabilities exceeding your actual cash profit. However, limited companies are exempt from Section 24. A limited company is taxed on its actual net profits after deducting 100% of mortgage interest expenses.
Tax Comparison Table: Limited Company vs Personal
The table below summarizes the key tax rules for buy-to-let investments held personally versus inside a limited company for 2026/27:
| Tax Metric | Personal Ownership | Limited Company (SPV) Ownership |
|---|---|---|
| Income Tax / Corp Tax | 20%, 40%, or 45% on gross income (less 20% credit) | 19% to 25% Corporation Tax on net profit |
| Mortgage Interest Deductibility | Restricted (Section 24 flat 20% relief credit) | 100% deductible as a business expense |
| Stamp Duty Land Tax (SDLT) | Standard SDLT + 3% Higher Rate surcharge | Standard SDLT + 3% Higher Rate surcharge |
| Capital Gains Tax (CGT) | 18% (basic rate) or 24% (higher rate) on residential property | No CGT; standard Corporation Tax on gains upon sale |
| Extracting Profits | Directly owned; cash is yours after tax | Dividends, salary, or director loan repayment |
| Inheritance Tax (IHT) Option | Subject to standard IHT (40% above nil-rate band) | Easier share transmission (family shares, gift plans) |
How the Math Works: A Worked Example
Consider a higher-rate (40%) taxpayer with a property generating £15,000 in annual rental income, with £8,000 in mortgage interest and £2,000 in other management expenses:
- Personal Name (Section 24): Tax is calculated on Rental Income minus management expenses (£15,000 – £2,000 = £13,000) at 40%, which equals £5,200. You then deduct the 20% mortgage interest tax credit (£8,000 * 20% = £1,600), leaving a net tax liability of **£3,600**. Your actual cash profit was £5,000 (£15,000 – £8,000 – £2,000), meaning your effective tax rate on cash profit is 72%!
- Limited Company: Tax is calculated on actual net profit (£15,000 – £8,000 – £2,000 = £5,000) at the Small Profits rate of 19%, resulting in **£950** Corporation Tax. You retain £4,050 inside the company to reinvest or distribute tax-efficiently.
To run your own scenarios, compare stamp duty costs, and evaluate your rental yields, utilize our Property Limited Company vs Personal Calculator.
Frequently Asked Questions (FAQ)
Q: What is the cost of transferring personal property into a limited company?
A: Transferring property you already own into a company counts as a sale. This triggers Stamp Duty Land Tax (SDLT) at corporate rates and potentially Capital Gains Tax (CGT) for you personally, based on the current market value. This can make transferring existing portfolios expensive unless you qualify for Incorporation Relief (Section 162).
Q: Are mortgage rates higher for limited companies?
A: Yes. Commercial and SPV limited company mortgage rates are traditionally 1% to 1.5% higher than personal buy-to-let mortgages, and arrangement fees are often higher. You must weigh these extra borrowing costs against your tax savings.
Q: Can I withdraw cash from my property company tax-free?
A: Generally, no. Cash held in the company must be withdrawn via dividends or salary, which are subject to personal tax. However, if you personally loaned the company money to buy the property (a Director’s Loan Account), the company can repay this loan to you completely tax-free.
Q: What is the Corporation Tax rate for property companies?
A: Property companies are subject to standard Corporation Tax rates: 19% on profits up to £50,000, and up to 25% on profits over £250,000, with marginal relief applying in between.
Q: Is a limited company structure better for Inheritance Tax?
A: Yes. It is generally easier to pass on shares in a property company to family members over time than transferring physical portions of a property. You can create different share classes (like alphabet shares) to distribute dividends or pass ownership to children while retaining control.