In recent years, more landlords have bought properties through, or transferred ownership to, a limited company so they can reduce their tax bill.
Read on to find out why tax changes have encouraged more landlords to set up a property company, as well as the pros and cons of taking this approach.
- What is a property company for buy-to-let?
- What are the pros and cons of setting up a buy-to-let company?
- How to set up a buy-to-let limited company in 5 steps
- Corporation tax rates versus individual tax rates
- Why landlords are transferring properties to limited companies
- How tax changes have impacted landlords’ finances
- Buy-to-let tax relief for landlords
- Capital gains tax for limited company landlords
What is a property company for buy-to-let?
As a landlord, you can buy properties as an individual and pay income tax, or you can buy them through a limited company and pay corporation tax.
Setting up a company for your buy-to-let portfolio is known as incorporation.
Landlords who own their properties through limited companies also receive their rental income differently as it belongs to the company. This means you can either pay yourself a salary from the company or take your rental income as dividends.
There’s extra admin involved in setting up a buy-to-let limited company, such as:
- keeping your accounts up to date
- registering with Companies House
- registering with PAYE (if you want to pay yourself a salary)
What are the pros and cons of setting up a buy-to-let company?
There are tax benefits to owning a limited company to rent out your properties, although it can be more complicated and time-consuming.
It’s important to weigh up the pros and cons and work out which ownership structure is best for you.
Benefits of incorporation
- owning through a limited company allows you to pay corporation tax, which is usually lower than individual income tax rates
- transferring a property between companies could mean you don’t need to pay stamp duty, inheritance tax, or capital gains tax, which could save you money
- restrictions on buy-to-let mortgage interest tax relief don’t apply to limited companies
- you may benefit from greater legal protection due to ‘limited liability’, which means if something goes wrong you’re only liable for the money you put in when the company was incorporated
Downsides of incorporation
- there are more responsibilities for landlords with limited companies, such as filing accounts and returns
- it can be harder to get a limited company buy-to-let mortgage, although the number of products has increased in recent years
- there are costs for switching to a limited company, and you’ll have to pay income tax if you take profits out of the company
- you’re likely to need specialist advice from a broker or accountant, which could cost you more and make the process longer
How to set up a buy-to-let limited company in 5 steps
Setting up a property company can be quick and easy, but it’s important to be aware of all the responsibilities and costs.
Here are five steps you need to take to get started:
- Register with Companies House – the cost for starting your company starts at £12
- Create a company name and give an address for your company
- Appoint directors and shareholders, and give a definition of business activity (relating to letting property)
- Once your company has been created, you’ll need to set up a business bank account and register to pay corporation tax
- Keep records such as a confirmation statement and annual returns, although many landlords outsource this work to an accountant
Read more: Certificate of Incorporation: registering with Companies House
Corporation tax rates versus individual tax rates
| Corporate ownership | Individual ownership |
| 19% on annual profits of under £50,000 | 20% on earnings between £12,571 and £50,270 |
| Between 19% and 25% on profits between £50,000 and £250,000 | 40% on earnings between £50,271 and £125,140 |
| 25% on profits over 250,000 | 45% on earnings over £125,141 |
Landlords who own their properties personally will pay 20 per cent tax on buy-to-let income between £12,571 and £50,270, with a higher rate of 40 per cent for income between £50,271 to £125,140. There’s an additional rate of 45 per cent of income over £125,141.
The main corporation tax rate is 19 per cent on annual profits of £50,000 or less. The top rate of corporation tax (on profits over £250,000) is 25 per cent. If your profits are between £50,000 and £250,000, you pay an effective corporation tax rate of between 19 per cent and 25 per cent.
Our guides to corporation tax and rental income tax return for landlords cover everything you need to know depending on which type of ownership you have.
Why are more landlords transferring their properties to a limited company?
The amount of landlords setting up limited companies has hit a record high.
Since 2020, landlords haven’t been able to claim buy-to-let mortgage interest as an expense on their income tax bill. It’s been replaced with a 20 per cent tax credit.
Leading to bigger tax bills for many landlords, particularly those that pay tax at a higher rate.
As a result, landlords have transferred ownership of their properties to limited companies to pay corporation tax instead.
Buy-to-let tax relief for landlords
If you run your portfolio through a limited company, the main tax relief is that you can claim mortgage interest as a business expense.
Whether this saves you a significant amount of money depends on your circumstances. However, if you’re a higher or additional rate taxpayer, limited company ownership is likely to lower your tax bill.
Limited company landlords can also benefit from inheritance tax relief if you’re planning on handing your property down to family in the future.
Capital gains tax for limited company landlords
Landlords who sell a property owned personally must pay Capital Gains Tax (CGT) on any profit that exceeds the annual tax-free allowance of £3,000. For residential property, the rates are currently 18 per cent (basic rate) or 24 per cent (higher rate).
However, if you own property through a limited company, the company does not pay CGT. Instead, the profit from the sale is added to the company’s annual income and is subject to corporation tax (between 19 per cent and 25 per cent).
Should you set up a limited company to buy property?
It can be costly to incorporate and sell your buy-to-let property to a limited company. There’s also the extra administration work to consider, and the potential cost of hiring an accountant.
However, due to Section 24 tax changes, there could be long-term benefits to setting up a limited company for your portfolio – particularly if you pay higher rate tax and own several properties.
Incorporating can give you more flexibility when it comes to your tax return and selling property.
Whether you decide to start a rental property business will depend on your financial circumstances and future plans.
Before you make any decision, make sure you speak to a financial expert and do your research.
More guides for buy-to-let landlords
- What is buy-to-let investment? A guide to buying and selling property
- Renting out your property: rules for landlords in 2025
- How can landlords get a buy-to-let remortgage?
- Why do I need landlord insurance?
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