Buying Investment Property Through a Limited Company: Tax Pros and Cons

The question of whether to hold investment property personally or through a limited company is one of the most heavily debated topics in UK property tax planning. Since the Section 24 mortgage interest restriction was phased in between 2017 and 2020, the arithmetic has shifted substantially for higher and additional-rate taxpayers. However, the corporate route is not universally superior — it involves real costs, restrictions and complexities that are frequently understated.

This guide sets out the genuine advantages and disadvantages of the company route and explains the factors that should drive the decision.

The Tax Advantages of the Company Route

Corporation tax versus income tax on rental profit.

Rental profits earned by an individual are subject to income tax at their marginal rate: 20% (basic), 40% (higher), or 45% (additional). For a higher-rate taxpayer with significant rental income, 40% income tax on profit is the base case.

A company pays corporation tax on its rental profits at 19% (small profits rate, for profits up to £50,000 per company) or up to 25% (main rate). Even at 25%, this is a 15-percentage-point saving versus the additional rate, and a 20-point saving versus higher-rate income tax, on the retained profit within the company. For property investors who reinvest profits rather than extracting them, the lower corporation tax rate allows faster capital accumulation.

Full mortgage interest deductibility.

This is the most significant structural advantage of the company route. Since April 2020, individuals holding buy-to-let property personally have been subject to Section 24 of the Income Tax (Trading and Other Income) Act 2005: mortgage interest can no longer be deducted from rental income before calculating the tax liability. Instead, a tax credit of 20% of the interest is applied after the income has been assessed. For higher-rate taxpayers, this effectively makes mortgage interest only 50% deductible (the 20% credit against a 40% tax rate), and for additional-rate taxpayers, the situation is even worse.

Companies are not subject to Section 24. A company can deduct 100% of mortgage interest as a business expense before calculating its taxable profit. For a highly leveraged property portfolio, this is potentially a very large number.

Capital gains taxed at corporation tax rates.

When an individual sells an investment property, the gain is subject to Capital Gains Tax at 18% (basic rate) or 24% (higher and additional rate), effective from 29 October 2024. A company pays corporation tax on the gain at 25% (or 19% if small profits rate applies). For a significant gain, the 24% individual CGT rate is close to the 25% corporate rate — but within the company, the gain can be reinvested and compounded at the lower corporate rate before any personal tax is paid on extraction.

The Disadvantages and Hidden Costs

Extraction costs: the second layer of tax.

The key point that advocates of the company route sometimes gloss over is that money inside the company is not the same as money in the owner's hands. To extract profits — to pay yourself — you must take a salary (subject to income tax and National Insurance) or a dividend (subject to dividend tax). The combined effective tax rate, once both the corporate and personal layers are included, is higher than many realise.

For a 25% corporation tax company paying dividends to a higher-rate taxpayer, the combined effective rate is approximately 44.9%. For an additional-rate taxpayer, it is approximately 51.3%. This compares to 40% or 45% for an individual holding personally. The advantage of the company route is therefore captured only in the deferral: money left inside the company is taxed once at 25%; money extracted is then taxed again.

The benefit is real but depends on a long-term view: the company is beneficial if you are content to accumulate within the structure for many years, or if you have plans to use retained profits for further property purchases without extracting them.

SDLT: no change.

A common misconception is that using a company avoids Stamp Duty Land Tax (SDLT). It does not. A company purchasing a residential property pays SDLT at exactly the same rates as an individual, plus the 5% additional dwellings surcharge (increased from 3% on 31 October 2024). There is also a further 2% surcharge for non-UK resident companies. SDLT is a transaction cost and is the same whether buyer is a company or an individual.

Annual Tax on Enveloped Dwellings (ATED).

ATED is an annual charge on residential property worth more than £500,000 that is held in a company, collective investment scheme, or other "non-natural person." For the 2026/27 tax year, the charges range from approximately £4,600 per year (for properties worth £500,000–£1 million) up to over £253,000 per year for properties worth over £20 million.

ATED applies per property and is indexed annually by CPI. For property investors accumulating a portfolio of higher-value properties, ATED represents a significant recurring cost that must be factored into the return calculation.

Reliefs from ATED are available where the property is rented out to a third party as a commercial let, or is being developed for sale — but the relief must be claimed annually and there are conditions. If a property is ever occupied by the shareholder or a connected person, the relief ceases.

Company buy-to-let mortgages.

Lenders offer mortgage products for company buy-to-let (often structured as a Special Purpose Vehicle or "SPV"), but the market is considerably smaller than the personal mortgage market, and rates are typically 0.2–0.5% higher than equivalent personal products. Lenders also assess the rental coverage ratio based on the higher corporation tax rate in some cases. The limited availability of competitive products can reduce the yield advantage of the company route.

CGT on share sale vs property sale.

If you ultimately sell the company rather than the property — passing ownership via shares — the buyer acquires your company's shares, not the property directly. Share purchases carry SDLT of 0.5% rather than the higher residential SDLT rates. However, many buyers insist on purchasing the underlying property rather than the company shares, because they cannot inspect the company's historic liabilities. This makes the property harder to sell, and can reduce realisable value.

Transferring Existing Property into a Company

If you already hold investment property personally and are considering transferring it to a company, be clear that this is not a free restructure. The transfer is a disposal for CGT purposes: any accrued gain is triggered at the point of transfer. It is also a transaction for SDLT purposes: the company pays SDLT on the market value of the property at the time of transfer.

"Incorporation relief" under Section 162 TCGA 1992 can defer the CGT charge on transfer, but only if the property is being transferred as part of a genuine business (not passive investment), all the assets of the business are transferred, and the whole of the consideration is shares. HMRC takes a strict view of what constitutes a "business" in this context, and for most passive landlords, incorporation relief is not available.

The exception: where a portfolio landlord is providing a level of services that amounts to a trade — active management, furnished holiday lets, property development alongside rental — the position is more nuanced and professional advice is essential.

Which Structure Is Right for You?

The decision depends on several factors:

• Your marginal tax rate. The higher the rate, the greater the corporation tax saving on retained profits.
• Leverage. The more mortgage interest you pay, the greater the Section 24 impact on personal holding, and therefore the greater the advantage of the company route.
• Extraction needs. If you need the rental income to fund your lifestyle, the double layer of tax erodes the headline advantage considerably.
• Time horizon. A 20-year buy-and-hold strategy is more suited to the company structure than a 5-year acquisition-and-sale cycle.
• Number of properties. A portfolio of five or more properties in a single SPV may benefit from economies of scale in professional fees, whereas a single property company may not justify the compliance costs.
• Non-resident status. For non-UK residents, a company owning UK property is subject to UK corporation tax on rental income and gains — but there can be additional benefits around privacy and the Automatic Overseas Test interaction.

This is one of the areas where bespoke professional advice genuinely pays for itself. Generic guidance — "always use a company" or "never use a company" — is insufficient. The right answer depends on your specific numbers.

How Global Investments Can Help

Global Investments advises property investors on the optimal structure for UK and international property portfolios, taking into account tax rates in multiple jurisdictions, extraction strategies, estate planning, and the interaction with your overall wealth picture. We work alongside specialist UK tax advisers to model the after-tax return under personal and corporate ownership before any acquisition is made. Contact our team for a confidential consultation.