Ltd Company vs Personal Property Tax Calculator 2026/27

Calculation runs based on standard HMRC rules.

Deductions are calculated and adjusted accordingly.

Frequently Asked Questions & Detailed Tax Guide

Should I buy buy-to-let properties personally or through a Limited Company?

Determining whether to hold buy-to-let properties in your personal name or within a corporate structure (Limited Company SPV) is one of the most critical tax decisions for UK property investors in the 2026/27 tax year. Since the phased implementation of Section 24 of the Finance (No. 2) Act 2015, individual landlords can no longer deduct mortgage interest from their rental income before calculating income tax. Instead, they receive a basic-rate tax credit capped at 20%. This change has pushed millions of higher-rate and additional-rate taxpayers into effective tax rates exceeding 60% on their actual profits. By contrast, Limited Companies are exempt from Section 24, allowing them to deduct mortgage interest as a pre-tax business expense, paying Corporation Tax only on net profits.

What are the core differences between personal and corporate ownership?

To evaluate the two options, you must compare their structural tax treatments:

• Mortgage Interest Relief: Personally, you get a 20% tax credit on mortgage interest. In a Limited Company, 100% of mortgage interest is deductible as an expense.
• Tax Rates: Personally, net rental income is taxed at your marginal rate (20%, 40%, or 45%). Corporately, profits are taxed at the Small Profits Rate of 19% (for profits up to £50,000) or the main Corporation Tax rate of 25% (for profits over £250,000, with marginal relief in between).
• Profit Extraction: Personally, all rental profits are yours immediately (after tax). Corporately, money belongs to the company; to extract it, you must pay dividends (subject to a tax-free allowance of £500, then taxed at 8.75% basic rate, 33.75% higher rate, or 39.35% additional rate) or a salary.
• Administrative Costs: Personal ownership has minimal admin (Self Assessment only). A Limited Company requires annual accounts, corporate tax returns (CT600), confirmation statements, and higher mortgage rates from commercial lenders.

Step-by-Step Mathematical Comparison: £20,000 Rental Profit

Let’s compare the tax liability for a higher-rate taxpayer (earning £60,000 from employment) with a rental property generating £20,000 in gross rent and having £10,000 in mortgage interest:

Scenario A: Personal Ownership

• 1. Gross taxable rental income: £20,000 (mortgage interest cannot be deducted).
• 2. Income tax due at 40%: £20,000 * 40% = £8,000.
• 3. Apply Section 24 20% basic rate credit on interest: £10,000 * 20% = £2,000 credit.
• 4. Net Tax Payable: £8,000 – £2,000 = £6,000.
• 5. Real profit before tax: £20,000 gross rent – £10,000 interest = £10,000 net profit.
• 6. Net cash after tax: £10,000 profit – £6,000 tax = £4,000 cash remaining (an effective tax rate of 60%!).

Scenario B: Limited Company SPV

• 1. Taxable corporate profit: £20,000 gross rent – £10,000 mortgage interest (fully deductible) = £10,000 taxable profit.
• 2. Corporation Tax at 19% Small Profits Rate: £10,000 * 19% = £1,900.
• 3. Net cash inside company: £10,000 profit – £1,900 tax = £8,100 cash remaining.
• 4. If cash is retained in the company to reinvest in more properties, no further tax is paid. If extracted entirely as dividends (assuming £500 dividend allowance is used elsewhere): £8,100 * 33.75% = £2,733.75 dividend tax.
• 5. Total tax on extraction: £1,900 + £2,733.75 = £4,633.75. Net cash extracted: £5,366.25.

Even if you extract all the cash immediately, the Limited Company saves £1,366.25 in tax. If you retain the cash to build a portfolio, you save £4,100 in tax annually, allowing you to compound your wealth twice as fast.

Tax Expert Pro-Tips & Succession Planning

David Vance, CTA FCA, recommends: “For landlords intending to build a multi-property portfolio, incorporation is almost always the correct path. It enables you to use family shares to distribute dividends tax-efficiently to family members with lower tax bands, and simplifies inheritance tax (IHT) planning through family investment companies. However, transferring existing personally held properties into a Limited Company triggers Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT) at market value. Always calculate these entry costs before incorporating an existing portfolio.”

Legislative References

• Income Tax (Earnings and Pensions) Act 2003 – Section 24 interest restriction rules.
• Corporation Tax Act 2010 – Corporate small profit rates and marginal relief rules.
• HMRC Property Income Manual (PIM2050-2058) – Deductions for interest and finance costs.