A company deducts mortgage interest in full against rental profit. An individual landlord does not. That single asymmetry — the Section 24 finance cost restriction — is why incorporated buy-to-let exists, and it is the only part of the comparison most articles get to.
The rest of the picture is less flattering. Getting property into a company costs Stamp Duty Land Tax and often Capital Gains Tax on the way in, mortgages are dearer, and taking the profit back out is taxed twice. Here is the whole thing, with numbers.
What Section 24 actually does
Since 6 April 2020, individual landlords cannot deduct residential finance costs from rental income at all. Instead they get a basic rate tax reduction of 20% of the lowest of three figures:
- Finance costs not deducted in the year, plus any brought forward
- Property business profits for the year, after brought-forward losses
- Adjusted total income above the Personal Allowance, excluding savings and dividend income
The reduction cannot create a refund. Anything unused carries forward.
The damage is not the 20% cap in isolation. It is that the interest is added back into your total income first — pushing landlords into the higher rate band, the Personal Allowance taper above £100,000 and the High Income Child Benefit Charge, on money they never received.
Companies are not subject to Section 24. It is an Income Tax provision, and a company deducts interest against rental profit in full under the loan relationship rules.
The comparison, with the arithmetic
Assumptions. England or Wales. Rental income £30,000, mortgage interest £12,000, other allowable expenses £4,000. The landlord has £60,000 of employment income, so is already a higher rate taxpayer. One property, one company, no associates. Real economic profit is £14,000.
| Individual | Company, profit extracted | Company, profit retained | |
|---|---|---|---|
| Taxable profit | £26,000 | £14,000 | £14,000 |
| Corporation Tax | — | £2,660 | £2,660 |
| Income Tax cost | £8,000 | £3,875.30 dividend tax | — |
| Total tax | £8,000 | £6,535.30 | £2,660 |
| Effective rate on £14,000 | 57.1% | 46.7% | 19.0% |
How the individual column is built
Property profit with finance costs added back is £30,000 − £4,000 = £26,000, so total income becomes £86,000. Income Tax on that: £37,700 at 20% (£7,540) plus £35,730 at 40% (£14,292) = £21,832. The finance cost reduction is 20% of the lowest of £12,000 (finance costs), £26,000 (property profits) and £73,430 (adjusted total income above the Personal Allowance) — so £2,400. Tax after the reduction is £19,432.
On £60,000 alone the tax would be £11,432. The property therefore costs £8,000 in tax on £14,000 of real profit. There is no National Insurance on property income.
How the company columns are built
Company profit is £14,000 with interest fully deducted. Corporation Tax at the 19% small profits rate is £2,660, leaving £11,340. Distribute it and the shareholder is already a higher rate taxpayer: £500 covered by the dividend allowance, £10,840 at the 2026/27 higher dividend rate of 35.75% = £3,875.30. Total £6,535.30. Retain it and the only tax is the £2,660.
The company wins by £1,465 a year on full extraction and by £5,340 on retained profit. For a landlord building a portfolio the second column is the real one — retained profit funds the next deposit at a 19% cost instead of 57%.
Dividend rates rose two points on 6 April 2026. Content still showing 8.75% and 33.75% overstates the extraction case.
What it costs to get property into a company
This is where incorporation cases fail.
Stamp Duty Land Tax. Transferring a property you own personally to your own company is a land transaction, charged on market value because the company is connected to you. On top of the standard residential rates there is a 5% surcharge on residential property bought by companies. A separate 17% flat rate applies to residential property over £500,000 bought by companies, though relief is available where the property is used in a genuine property rental business — that relief has conditions and must be claimed. Non-UK residents pay a further 2%.
Capital Gains Tax. The transfer is a disposal at market value. Residential gains are taxed at 18% within the basic rate band and 24% above, and reported and paid within 60 days.
Incorporation relief may defer that gain — but only if you have a business. TCGA 1992 s162 rolls the gain into the base cost of the shares where a person transfers a business as a going concern, with the whole of its assets other than cash, in exchange for shares. Relief is automatic; no claim is needed.
The word doing the work is “business”. A passive portfolio run by a managing agent may not clear the bar; a substantially managed one may. This is genuinely uncertain and fact-specific, and it is the most important thing to take specialist advice on before transferring anything. Do not treat a favourable tribunal decision on someone else’s facts as covering yours.
You will also need to redeem and replace the mortgages. Early repayment charges, arrangement fees and legal costs are real.
Living with the company
Mortgages cost more. Limited company buy-to-let lending is a smaller market with fewer lenders, higher rates and fees, and director personal guarantees as standard. That cost eats into the Section 24 saving, sometimes entirely. Model it with real quotes.
ATED. A company holding a dwelling worth more than £500,000 is in the Annual Tax on Enveloped Dwellings regime. The charges for 1 April 2026 to 31 March 2027:
| Property value | Annual charge |
|---|---|
| Over £500,000 up to £1m | £4,600 |
| Over £1m up to £2m | £9,450 |
| Over £2m up to £5m | £32,200 |
| Over £5m up to £10m | £75,450 |
| Over £10m up to £20m | £151,450 |
| Over £20m | £303,450 |
Relief is available for property rental businesses — but you have to file a Relief Declaration Return to claim it. Missing the return, not the tax, is the usual failure.
The close investment holding company trap. A close company that exists wholly or mainly to invest in land let commercially to unconnected persons sits outside the close investment holding company definition, keeping the 19% small profits rate and marginal relief. Let a property to a connected person — or the spouse or a relative of one — and the company can become a CIHC, paying 25% on all profits with no small profits rate and no marginal relief. Housing an adult child in a company-owned flat is exactly the fact pattern that triggers this.
Accounts. A property company files annual accounts and a CT600, and directors and people with significant control must verify their identity with Companies House. One technical point catches property companies out: FRS 105, the micro-entity standard, prohibits carrying investment property at fair value. You hold it at cost less depreciation and impairment, and deferred tax is prohibited outright. A company wanting its balance sheet to show current values needs FRS 102 Section 1A. Decide this before the first accounts, not after.
Corporation Tax is payable nine months and one day after the year end, roughly three months before the CT600 is due.
Who this actually suits
It suits a higher or additional rate taxpayer with meaningful borrowing who is buying new properties and retaining profit. It usually does not suit a basic rate taxpayer, an unmortgaged or one-property landlord, or anyone who needs the rental profit as income each year.
Transferring an existing portfolio is a separate decision from buying the next one in a company. The second involves no SDLT transfer charge and no CGT event. Many landlords should do the second and leave the first alone.
Frequently asked questions
Is buy-to-let better through a limited company?
It depends on your tax rate, your borrowing and whether you need the income. On the worked example above — £30,000 rent, £12,000 interest, a higher rate taxpayer — a company costs £6,535 in tax if profit is extracted and £2,660 if it is retained, against £8,000 for an individual. The retained-profit case is where the difference is decisive. It rarely helps a basic rate or unmortgaged landlord.
Can I move my existing buy-to-lets into a company without paying tax?
Not usually. The transfer is a disposal at market value for Capital Gains Tax and a land transaction for Stamp Duty Land Tax, including the 5% company surcharge. Incorporation relief under TCGA 1992 s162 can defer the gain, but only where the letting activity amounts to a business, which is fact-specific and genuinely uncertain. It does not remove the SDLT.
Do limited company landlords still get mortgage interest relief?
Yes, in full. The Section 24 finance cost restriction is an Income Tax provision and applies to individuals, not companies. A company deducts interest against rental profit under the loan relationship rules.
What is ATED and will my company pay it?
The Annual Tax on Enveloped Dwellings applies to companies holding UK dwellings valued over £500,000, starting at £4,600 for 2026 to 2027. Relief is available for genuine property rental businesses, but you must file a Relief Declaration Return to claim it — the charge is not automatically disapplied.
Can I let a company-owned property to my own family?
You can, but consider the tax first. A close company loses its exclusion from the close investment holding company rules where land is let to a connected person or their spouse or relatives. A CIHC pays Corporation Tax at 25% on all profits, with no small profits rate and no marginal relief.
Getting the accounts right
Property companies are not hard to run, but they are easy to set up on the wrong accounting basis and easy to trip into ATED or CIHC status without noticing.
SmartFiling files micro-entity accounts and Corporation Tax returns for small companies on a fixed fee, from £299 with a seven working day turnaround. Every submission is reviewed by an ICAEW Chartered Accountant.
