Should You Set Up a Limited Company for Buy-to-Let Properties?

Date: January 16, 2026

Landlords expanding rental portfolios increasingly ask whether a limited company for buy-to-let properties is more tax-efficient than personal ownership. Changes to mortgage interest relief, higher personal tax rates, and long-term planning make this a key consideration for UK property investors.

Why are landlords choosing limited companies for buy-to-let property?

Many UK landlords consider a limited company for buy-to-let property because corporation tax rates and full mortgage interest relief can provide significant advantages over personal ownership. High-rate taxpayers often find that retaining profits within a company reduces their overall tax liability.

Company ownership is also a strategic tool for long-term planning. Landlords looking to grow a portfolio, reinvest profits, or manage property across generations can benefit from the flexibility that company ownership offers.

Beyond taxation, separating property ownership into a corporate structure can help clarify financial reporting and reduce personal liability, particularly when multiple properties or investors are involved.

Is a limited company more tax-efficient for buy-to-let landlords?

A limited company can offer lower tax rates for landlords who do not need to extract all rental income immediately. Corporation tax on rental profits is generally lower than the higher or additional rate of personal income tax.

For landlords reinvesting profits to expand their portfolio, retaining income inside the company can maximise cash flow and growth potential. The structure also allows for planned dividend distribution over time rather than immediate full withdrawal.

It is important to note, however, that when profits are eventually withdrawn as salary or dividends, personal tax applies. The net benefit depends on the landlord’s long-term strategy and income requirements.

How does mortgage interest relief work in a buy-to-let limited company?

Limited companies can deduct mortgage interest in full, unlike individuals, who are restricted to a basic-rate tax credit. This can substantially reduce taxable profits for highly leveraged rental properties.

Landlords using a company structure should weigh this tax advantage against the fact that company mortgages often have higher interest rates, fewer lenders, and additional fees. Despite this, the full interest deduction often outweighs the increased borrowing cost for larger portfolios.

Overall, mortgage interest relief in a company can enhance profitability and improve cash flow, particularly for landlords planning to reinvest profits in additional properties.

When does using a limited company for property investment make sense?

Limited companies are most beneficial from a tax perspective for landlords who plan to grow a rental portfolio and reinvest profits rather than relying on rental income for personal living expenses. This approach suits higher-rate taxpayers seeking long-term growth and tax efficiency.

Company ownership also supports succession planning and shared ownership arrangements. Transferring shares is generally simpler than transferring individual properties, offering flexibility when introducing family members or business partners into the ownership structure.

For investors focused on short-term income or smaller portfolios, the advantages of a limited company may be outweighed by increased administrative requirements and mortgage costs.

When might personal ownership be better than a property company?

Personal ownership often remains the preferred option for basic-rate taxpayers, first-time landlords, or those holding one or two properties. It involves simpler administration, lower setup costs, and easier access to mainstream mortgage products.

Landlords who rely on rental income for personal expenditure benefit from direct access to profits without the need to plan salary or dividends. Personal allowances and capital gains exemptions are also preserved.

Ultimately, simplicity and immediate accessibility of income can make personal ownership more practical for smaller-scale investors or those prioritising minimal administrative overhead.

What are the disadvantages of holding buy-to-let property in a limited company?

Running a limited company adds ongoing responsibilities, including annual accounts, corporation tax returns, and statutory filings. Professional accounting costs are unavoidable, which can reduce net profitability for smaller portfolios.

Mortgage selection may be more limited for companies, with stricter lending criteria and higher fees. The combination of administrative, legal, and financial obligations means that company ownership is best suited to investors with sufficient scale to justify the structure.

Exiting a company property can be more complex. Corporation tax applies to gains and extracting profits can trigger further taxation. Therefore, careful planning is essential to avoid unexpected costs.

Making Tax Digital for Income Tax – implications to consider

Making Tax Digital for Income Tax (MTD IT) will be introduced in phases from April 2026, replacing annual Self Assessment returns with digital record-keeping and quarterly reporting to HMRC for landlords and the self-employed. Landlords will need to use HMRC-approved software to keep digital records of income and expenses, submit quarterly updates, and complete a final annual declaration.

The added administrative burden and costs (if using an agent) these obligations will bring, may also make a limited company structure more attractive, and should also be weighed up.

Alexander & Co specialises in landlord tax and has a dedicated Making Tax Digital team ready to help landlords prepare, remain compliant, and avoid penalties as the new rules come into force. You can read more on our page: Making Tax Digital for Income Tax and how it affects landlords in particular in our article: MTD for Landlords – A Comprehensive Making Tax Digital Guide.

Can you transfer existing buy-to-let properties into a limited company?

Transferring personally owned rental properties into a limited company typically incurs Stamp Duty Land Tax and Capital Gains Tax. These costs make post-purchase incorporation generally uneconomical for most landlords.

Although limited reliefs exist in certain partnership or incorporation scenarios, they are narrowly applicable. Landlords usually prefer to acquire new properties through a company rather than restructure existing holdings. Where a property has been your main residence and you are transferring this into the company, reliefs are usually available. This can mean that capital gains tax is reduced or eliminated.

Professional guidance is essential before attempting any transfer, as miscalculations can lead to significant financial liability.

Should landlords seek professional advice before setting up a property company?

Deciding whether to establish a limited company for buy-to-let property requires a detailed assessment of tax position, borrowing needs, income requirements, and long-term goals. There is no one-size-fits-all solution.

Professional advice ensures decisions are based on accurate projections rather than assumptions. At Alexander & Co we can model scenarios to determine whether company or personal ownership will deliver the best outcome.

Investing in expert guidance can prevent costly restructuring, reduce unexpected tax charges, and ensure long-term portfolio efficiency.

Contact our property tax specialists at Alexander & Co for advice

Our team can provide tailored guidance on whether a limited company is appropriate for your buy-to-let investments. We evaluate both personal and company ownership scenarios. Here we factor in taxation, borrowing, and long-term strategy to help landlords make informed decisions.