Limited Company vs Personal Buy-to-Let: Which Is Better? (2026/27)
Last updated 23 June 2026 · 12 min read · By the LandlordTaxAi Editorial Team
The short answer
A limited company usually wins for higher-rate taxpayers building a portfolio who reinvest the profits— it sidesteps Section 24 and pays Corporation Tax at 19%–25% instead of Income Tax at 40%–45%. Personal ownership is usually better for a single property, a basic-rate taxpayer, or anyone who needs to spend the rent. There is no universal answer — it turns on your band, your gearing and your plans.
“Should I buy through a limited company?” is the most common tax question landlords ask in 2026, and most articles answer it with a one-sided sales pitch. This guide gives you the honest version: where a company genuinely saves tax, where it quietly costs more, and the trap of transferring properties you already own. By the end you will know which side of the line you are on. To put real numbers behind it, use our landlord tax calculator.
Why this question even exists: Section 24
Before 2017, individual landlords deducted mortgage interest in full before calculating their taxable profit. Section 24 phased that out. Today an individual gets only a flat 20% tax credit for mortgage interest, no matter their tax band. For a higher-rate taxpayer with a big mortgage, this means being taxed on income that has effectively already gone to the lender — sometimes producing a tax bill larger than the real cash profit. Companies are not caught by Section 24, and that single fact drives almost every incorporation decision. Read our full Section 24 explainer.
Side by side: the real differences
| Factor | Personal | Limited company |
|---|---|---|
| Mortgage interest | 20% credit only (Section 24) | Fully deductible |
| Tax on profit | Income Tax 20% / 40% / 45% | Corporation Tax 19% / 25% |
| Getting money out | It is already yours | Dividend tax 8.75% / 33.75% / 39.35% |
| Mortgage rates | Lower, wider choice | Higher, fewer lenders |
| Admin cost | Self Assessment only | Annual accounts + CT return + payroll/dividends |
| Selling later | CGT 18% / 24% + £3,000 allowance | Corporation Tax on the gain (no £3,000 allowance) |
The pattern is clear: a company is a retention vehicle. If you keep profits inside it to buy the next property, you only pay Corporation Tax and the maths is excellent. The moment you draw the money out for yourself, the second layer of dividend tax can wipe out the advantage.
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Rental profit & tax calculator
Estimate the tax on your rental income for 2026/27
Result
- Taxable profit (rent − expenses)
- £11,200
- Income Tax at 40%
- £4,480
- Less mortgage interest credit (20%)
- − £1,000
- Tax due on this property
- £3,480
- Income after tax
- £7,720
Estimate based on verified 2026/27 UK rates. Informational only — not personal tax advice.
See your personal tax bill first
Before you weigh up a company, know what you pay personally. Our landlord tax calculator shows the Section 24 impact in seconds.
Open the landlord tax calculatorA full worked example
Sara is a higher-rate taxpayer. A buy-to-let earns £20,000 rent with £9,000 of mortgage interest and £2,000 of other costs — a real profit of £9,000. She reinvests the profit rather than spending it.
| Step | Personal | Company |
|---|---|---|
| Taxable profit (interest treatment differs) | £18,000 | £9,000 |
| Tax before interest credit | £7,200 (40%) | £1,710 (19%) |
| Less: 20% mortgage interest credit | − £1,800 | — |
| Tax on the profit | £5,400 | £1,710 |
On retained profit the company keeps £7,290 to reinvest versus £3,600 personally — a striking difference driven by Section 24. But if Sara needed to take that £9,000 out as a dividend, she would pay roughly a further 33.75% on most of it, and the gap would close dramatically. That is the whole decision in one example: retain and the company wins; spend and it often does not.
The trap: transferring properties you already own
Moving an existing personally owned property into your own company is not a simple paperwork exercise. HMRC treats it as a sale to the company at market value, which can trigger:
- Capital Gains Tax at 18%/24% on the gain since you bought it;
- Stamp Duty Land Tax for the company, including the 5% additional-dwelling surcharge;
- Early-repayment charges and the cost of remortgaging onto company products.
Incorporation Relief can defer the CGT if your lettings genuinely amount to a business, but it does not remove the SDLT. For most landlords with one or two mortgaged properties, the cost of transferring outweighs the saving — the company route makes far more sense for new purchases.
Who each option suits
Lean towards a company if you…
- are a higher- or additional-rate taxpayer
- are buying several properties over time
- will reinvest profits rather than spend them
- are highly geared (big mortgages)
Lean towards personal if you…
- are a basic-rate taxpayer
- own just one or two properties
- need the rental income to live on
- have little or no mortgage
Frequently asked questions
Is it better to buy property through a limited company or personally?
It depends on your tax band, how many properties you have, and whether you need the rental income now. A limited company usually wins for higher-rate taxpayers building a portfolio who reinvest profits, because the company deducts mortgage interest in full and pays Corporation Tax at 19%–25% rather than Income Tax at 40%–45% with the restricted Section 24 relief. Personal ownership is often simpler and cheaper for a single property, a basic-rate taxpayer, or anyone who needs to spend the rent rather than retain it.
What is Section 24 and why does it push landlords to companies?
Section 24 restricts the tax relief individual landlords get on mortgage interest to a flat 20% tax credit, rather than deducting the interest in full. For a higher-rate taxpayer this effectively taxes part of an expense, so a heavily mortgaged portfolio can show a 'profit' for tax even when cash flow is thin. Limited companies are not subject to Section 24 — they deduct mortgage interest in full against profits — which is the single biggest reason landlords incorporate.
How is a property company taxed in 2026/27?
A company pays Corporation Tax on its rental profit: 19% on profits up to £50,000 (the small profits rate), 25% on profits above £250,000, and an effective rate between the two with Marginal Relief in the middle band. To get the money out personally you then pay dividend tax — 8.75% (basic), 33.75% (higher) or 39.35% (additional) — after the £500 dividend allowance. So profit you leave in the company to buy more property is taxed lightly; profit you draw out is taxed twice.
Can I just transfer my existing properties into a company?
Not for free. Moving a personally owned property into your own company is a disposal at market value, which can trigger Capital Gains Tax (18%/24%) and Stamp Duty Land Tax (including the 5% additional-dwelling surcharge) on the way in. Incorporation Relief can defer the CGT if your lettings are run as a genuine business, but the SDLT and remortgaging costs usually remain. Always model the full transfer cost before incorporating an existing portfolio.
Does a limited company help with inheritance tax and succession?
It can. Shares in a property company are often easier to pass on gradually than the properties themselves, and you can bring family members in as shareholders. However, an investment (not trading) property company does not get Business Relief from Inheritance Tax, so this is about flexibility and planning rather than an automatic IHT exemption. Take specialist advice before relying on a company for estate planning.
Written and reviewed by the LandlordTaxAi Editorial Team. Our guides are reviewed against current HMRC guidance and updated when the rules change. Operated by LandlordTaxAi, United Kingdom. Follow us on LinkedIn.
Last reviewed: 23 June 2026 · Based on HMRC guidance on Corporation Tax rates and Marginal Relief, the Section 24 finance cost restriction, and dividend taxation. Figures are for the 2026/27 tax year. This article is informational only and does not constitute tax advice. Incorporation is a major decision — always take advice from a qualified accountant before acting.