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The proportion of buy-to-let mortgages taken in a limited company has risen from under 20% in 2016 to over 56% in 2025 - a direct consequence of Section 24 restricting mortgage interest relief for individual landlords. But the limited company route is not universally beneficial. This report provides a complete analysis of when the structure does and does not make financial sense.
Corporation tax on profits
25%
vs up to 45% personal rate
BTL mortgages now in ltd companies
56%
Up from 20% in 2016
Additional SDLT surcharge
3%
Still applies to ltd company purchases
Why this matters in 2026
Section 24 is now fully phased in. Individual landlords can no longer deduct mortgage interest from rental profits - they receive only a 20% basic rate credit. For higher rate taxpayers this effectively increases tax on leveraged rental income by 20 percentage points. The corporation tax rate is 25% for companies with profits above 250,000 versus 40-45% for higher rate individuals.
In this report
01
The Section 24 impact on individual landlords
Section 24 of Finance Act 2015 fully implemented April 2020 restricts deductibility of mortgage interest for individual residential landlords. Prior to 2017 landlords could deduct 100% of mortgage interest from rental income before calculating tax. From 2020 mortgage interest is not deductible - instead a 20% basic rate credit applies.
For a higher rate taxpayer with rental income of 20,000 and mortgage interest of 12,000: the taxable profit is 20,000 not 8,000. Tax at 40% is 8,000 reduced by the 20% credit of 2,400 giving a net tax bill of 5,600 versus 3,200 under the old rules. For landlords with significant leverage Section 24 can produce a tax liability exceeding actual cash profit after mortgage payments.
Key insight
A higher rate landlord with 30,000 rental income and 20,000 mortgage interest pays 5,200 more in tax per year under Section 24 compared to the pre-2017 rules.
02
Corporation tax vs income tax comparison
A limited company pays corporation tax at 19% on profits up to 50,000 and 25% on profits above 250,000. A limited company can deduct mortgage interest in full - Section 24 applies only to individual landlords not companies. For a property generating 15,000 net profit after mortgage interest the company pays 3,750 (25%) versus 6,000 for a higher rate individual - a saving of 2,250 per year per property.
However this saving only materialises if profit remains in the company. When extracting cash as dividends the combined tax burden must be compared to the individual route on a whole-lifecycle basis.
Key insight
A higher rate landlord with 15,000 annual net profit retaining it within a company saves 2,250 per year in tax but will pay further tax when extracting cash as dividends.
Important
The limited company saves tax only when profits are retained. If cash is extracted annually as dividends the total combined tax is often similar to or higher than the personal rate.
03
Mortgage availability and rate premium
Limited company BTL mortgages typically carry higher interest rates - approximately 0.3-0.5 percentage points higher than equivalent personal name products as of April 2026. The additional interest cost must be modelled against the tax saving. For a 200,000 mortgage at 0.4% higher rate the additional annual interest is 800. If the tax saving exceeds 800 the structure is tax-positive.
Most lenders require the mortgage to be taken by a Special Purpose Vehicle (SPV) company with SIC code 68209 (buy-to-let landlord) rather than a trading company.
Key insight
The higher mortgage rate for limited company BTL reduces the annual tax saving by approximately 800 per 200,000 of borrowing - a key factor in the break-even analysis.
Important
Using an existing trading company rather than a dedicated SPV may restrict mortgage availability and creates complications with company accounts and tax returns.
04
Transferring existing properties
Moving a personally held buy-to-let into a limited company is a legal disposal by the individual and acquisition by the company triggering CGT on any gain at personal level and SDLT on the acquisition including the 3% surcharge.
For a property bought for 150,000 now worth 280,000 transferring to a company triggers CGT on a 130,000 gain - up to 31,200 in tax for a higher rate taxpayer. SDLT on the 280,000 purchase by the company is 12,900. Total transfer cost approximately 44,000.
Key insight
The cost of transferring one property into a company (CGT plus SDLT) frequently exceeds 10-15% of property value - worthwhile only for very large portfolios with a long remaining hold period.
Important
Incorporation relief is available only where the rental activity constitutes a genuine business. HMRC does not accept passive letting of a small number of properties as qualifying.
05
When the structure makes financial sense
The limited company structure tends to make financial sense where: the landlord is a higher rate taxpayer genuinely intending to retain profits in the company rather than extract annually; the portfolio is being built over time and profits will compound at the lower corporation tax rate; the investment horizon is 10 or more years; and the portfolio is large enough that professional costs are proportionate.
For landlords building new portfolios starting in a limited company from the outset avoids the transfer cost problem entirely.
Key insight
A landlord retaining 15,000 annual company profit for 20 years at 5% growth compounds to 330,000 inside the company versus 247,000 net if taxed personally at 40% each year.
Important
The limited company route involves greater administrative complexity and ongoing professional costs. These must be factored into the break-even analysis.
Action checklist
- Calculate your current Section 24 tax impact
- Model the break-even: annual tax saving versus higher mortgage rate set-up costs and professional fees
- If considering a transfer obtain CGT and SDLT cost estimates before proceeding
- For new acquisitions set up an SPV with SIC code 68209 before exchange
- Ensure your mortgage broker has access to limited company BTL lenders
- Review your salary and dividend strategy for extracting profits tax-efficiently
- Take advice on whether an existing portfolio qualifies for incorporation relief
Sources
- Finance Act 2015 Section 24 mortgage interest restriction
- HMRC Property Income Manual PIM2050: gov.uk/hmrc-internal-manuals/property-income-manual
- UK Finance BTL market statistics 2025
- HMRC Corporation Tax rates: gov.uk/corporation-tax-rates
- SDLT rates: gov.uk/stamp-duty-land-tax/residential-property-rates
Disclaimer: For information only. Not financial, tax or legal advice. Consult a qualified adviser before making decisions. Figures correct April 2026.
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Capital Gains Tax on Property UK 2026: Rates, Exemptions and How to Reduce It
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Pension Annual Allowance UK 2026: 60,000 Limit, Carry Forward and Tapering Rules
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