Buying Property Through a Limited Company – Pros & Cons

It used to be the case that only a small minority of property investors bought a house through a limited company. Since mortgage tax relief for individual landlords was phased out from 2017, that number has grown every year, and buying property through a limited company is now the default route for a large share of new landlords.

The appeal is straightforward. If you’re a higher rate taxpayer renting out a property as a private individual, you could pay up to 45% Income Tax on your rental profit. Buy through a limited company instead, and you pay Corporation Tax – as little as 19% if the company’s profit is under £50,000. Put in these simple terms, it sounds like an easy decision. But before you call your accountant and start registering with Companies House, there’s more to the pros and cons than the headline tax rates suggest.

This guide covers the tax benefits and drawbacks of buying through a company, explains how a special purpose vehicle (SPV) works and why lenders insist on one, brings the stamp duty and Capital Gains Tax figures fully up to date for 2026, and ends with a simple framework to help you work out whether incorporating suits your situation.

What Does “Buying Through a Limited Company” Actually Mean?

When people talk about buying property through a limited company, they usually mean setting up a private company limited by shares, then having that company – rather than the individual – purchase, hold and let the property. You control the company as a director, and usually own it as a shareholder too, but legally the property belongs to the company, not to you personally.

Most landlords who take this route set up what’s known as a special purpose vehicle, or SPV, rather than using an existing trading company. We explain exactly what that means, and why it matters for getting a mortgage, further down.

Advantages of Buying a Property Through a Limited Company

Tax efficiency and the Corporation Tax rate

The main tax benefit of buying a property through a limited company is how rental profit is taxed. As a private landlord, rental income is added to your other earnings and taxed at your marginal Income Tax rate – up to 45% if you’re a higher or additional rate taxpayer. A limited company pays Corporation Tax on its profits instead.

Corporation Tax works on a tiered system. Companies with profits of £50,000 or less pay the small profits rate of 19%. Companies with profits above £250,000 pay the main rate of 25%. Profit that falls between the two thresholds benefits from marginal relief, a sliding scale that gradually tapers the effective rate up towards 25%. For a landlord running a handful of properties through one SPV, that typically means paying 19% Corporation Tax rather than 40–45% Income Tax on the same rental income – a meaningful tax saving for higher rate taxpayers in particular.

There’s a second, often bigger, factor: mortgage interest. Since 2017, individual landlords have gradually lost the ability to deduct mortgage interest from rental income before working out their tax bill. Under Section 24 of the Finance Act 2015 – sometimes called the “tenant tax” – private landlords now receive only a 20% tax credit on mortgage interest, regardless of what rate of Income Tax they actually pay. For a higher-rate taxpayer with a heavily mortgaged property, this can mean paying tax on turnover rather than real profit.

Section 24 doesn’t apply to companies. A limited company can still deduct mortgage interest in full as a business expense before calculating its Corporation Tax bill. For a landlord with several mortgaged properties, this difference alone is often the deciding factor in favour of incorporating.

Limited liability – with a caveat

Buying through a limited company also creates a legal separation between the property business and your personal finances. If the company runs into financial difficulty, your personal assets are, in principle, protected.

In practice, this protection is often narrower than it sounds – most buy-to-let lenders will ask directors for a personal guarantee before approving a company mortgage. We explain what that means for you in the SPV section below.

More flexible ownership

A residential property bought personally can only be held by a maximum of four legal joint owners. Buying through a limited company removes that limit – shares can be split between any number of family members or co-investors, in whatever proportions suit your plans. This makes it easier to bring in additional shareholders as your portfolio grows, or to split rental income between family members.

A note on Inheritance Tax – and a common myth

You’ll see plenty of content online claiming that buying property through a limited company reduces Inheritance Tax because company shares can qualify for Business Relief. This isn’t reliably true for a standard buy-to-let portfolio, and it’s worth being clear about why.

Business Relief (formerly Business Property Relief) can reduce or remove the Inheritance Tax due on a genuine trading business. However, HMRC specifically excludes businesses that consist “wholly or mainly” of making or holding investments – and letting residential property on standard tenancies is treated as an investment activity, not a trade. In practice, that means a straightforward buy-to-let SPV generally won’t qualify for Business Relief, whether the properties are held personally or through a company. Genuine property development or trading businesses, and in narrow circumstances some furnished holiday lets or serviced accommodation with a high level of additional services, may qualify – but the bar is high and HMRC scrutinises these claims closely.

If Inheritance Tax planning is a significant part of your reasoning for incorporating, take specialist advice before assuming Business Relief will apply. A limited company can still help with succession planning in other ways – for example, gifting shares to family members over time – but tax relief from Business Relief on a standard rental portfolio usually isn’t one of them.

What Is a Special Purpose Vehicle (SPV) and Why Does It Matter?

Almost every limited company buy-to-let lender expects to see a special purpose vehicle rather than an existing trading company. An SPV is simply a private limited company set up for the sole purpose of buying, holding and letting property – it doesn’t trade in anything else.

What makes a company an SPV, from a lender’s point of view, is its Standard Industrial Classification (SIC) code – the code every company registers with Companies House to describe its main business activity. Most limited company mortgage lenders want to see one of the following:

• 68100 – Buying and selling of own real estate
• 68209 – Other letting and operating of own or leased real estate (the most common code for a straightforward buy-to-let SPV)
• 68320 – Management of real estate on a fee or contract basis

Some lenders also accept 68201 (letting and operating of Housing Association real estate). A company registered with an unrelated or general trading SIC code will usually be rejected outright by limited company mortgage lenders or face a much smaller pool of options, because trading companies carry income streams that are harder to underwrite.

The good news is that setting up an SPV is quick and inexpensive. Registering a new company with Companies House costs from £12 online, is usually approved within 24 hours, and there’s no minimum trading history required – many lenders will approve a mortgage for an SPV incorporated the same week.

Personal guarantees

The limited liability an SPV offers is rarely as complete as it sounds. Most limited company buy-to-let lenders require an unsupported personal guarantee from each director, and sometimes each shareholder. This means that if the company defaults on the mortgage, the individual directors become personally liable for the shortfall – in much the same way as if they’d borrowed the money directly in their own name.

It’s worth being clear-eyed about this when weighing the pros and cons of a limited company structure: the tax benefit of incorporating is real, but the personal liability protection is often more limited in practice than the “limited” in limited company might suggest.

Incorporating a property portfolio through an SPV has become the norm rather than the exception. More than 440,000 buy-to-let companies were on the Companies House register by the end of 2025, and industry research suggests around three-quarters of new buy-to-let purchases are now made this way – up sharply from a decade ago. The number of properties purchased through a limited company has climbed steadily each year, largely as a direct response to Section 24.

Disadvantages and Costs to Consider

The tax efficiency of a limited company structure needs to be weighed against some real costs – both one-off and ongoing.

Capital Gains Tax on transferring an existing property

If you already own a property personally and want to move it into a limited company, you’ll need to sell it to the company at market value, just as you would to any other buyer. This is often the biggest single obstacle to incorporating an existing portfolio, because it can trigger a Capital Gains Tax bill if the property has risen in value since you bought it.

For individuals, Capital Gains Tax on residential property is charged at 18% on gains that fall within your basic rate Income Tax band, and 24% on gains above it, so most higher rate taxpayers pay 24% on the gain. Everyone has an annual CGT exempt amount, currently £3,000, before this tax applies.

There’s no separate charge once a property is inside a company – when a limited company sells a property, any profit is simply added to its other profits and taxed at the applicable Corporation Tax rate, and there’s no equivalent annual allowance. If you set up your company before buying, rather than transferring an existing property into it, this cost doesn’t arise at all – one reason many landlords prefer to buy through a limited company from the outset.

Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) is where outdated advice causes the most confusion, because the rates have changed twice in the last two years. Both the standard SDLT bands and the additional-property surcharge were revised from 1 April 2025, and the surcharge itself rose from 3% to 5% in the October 2024 Budget. Here’s where things stand currently.

Standard rates (single residential property, England and Northern Ireland):

Buying a property through a limited company almost always counts as buying an “additional” residential property for SDLT purposes, regardless of whether the company already owns another property. This means an extra 5% surcharge applies on top of the standard rates above, on purchases up to £500,000.

Worked example – a £350,000 buy-to-let flat bought through a limited company:

• 5% on the first £125,000 = £6,250
• 7% on the next £125,000 = £8,750
• 10% on the remaining £100,000 = £10,000
• Total SDLT payable: £25,000

Companies buying residential property worth more than £500,000 face a further complication. A flat rate of 17% SDLT applies to the entire purchase price – not just the portion above £500,000 – unless a specific relief applies. The relief most landlords rely on covers property let to unconnected third parties as part of a genuine rental business; it isn’t available if a director, shareholder or a connected family member intends to live in the property.

Worked example – a £650,000 buy-to-let house bought through a limited company:

• If the property qualifies for rental-business relief, standard rates plus the 5% surcharge apply, giving a total SDLT bill of £55,000
• If no relief applies (for example, a director’s family member will live in the property): the flat 17% rate applies to the full price, giving a total SDLT bill of £110,500

That’s a difference of more than £55,000 on the same property, which is exactly why it’s essential to confirm relief eligibility before completing a purchase over £500,000 through a company.

A couple of other points worth knowing: non-UK resident buyers, including UK companies controlled by non-UK residents, face a further 2% surcharge on top of everything above. And Multiple Dwellings Relief, which used to reduce SDLT when buying several properties in one transaction, was abolished from June 2024, so portfolio purchases no longer benefit from averaging in the way they once did.

Higher mortgage costs

Limited company buy-to-let mortgages are a smaller, more specialist market than personal buy-to-let lending. Rates are typically somewhat higher than the equivalent personal mortgage, though the gap has narrowed as more lenders have entered the market, and companies are usually asked for a larger deposit. If you’re moving an existing mortgaged property into a company, you may also face early repayment charges on your current mortgage, plus new legal and valuation fees for the company mortgage.

Costs of setting up and running the company

Registering a company costs from £12 for a standard online application, usually approved within 24 hours; a same-day service is available for £100 if submitted by 3pm. Running the company is the highest ongoing cost. You’ll need to file annual accounts and a confirmation statement with Companies House, prepare a Company Tax Return to work out your Corporation Tax bill, and typically pay an accountant to handle this – fees are usually higher than for a personal self-assessment return covering rental income. If you want to draw money out of the company as salary or dividends, you’ll also need to run PAYE and factor in your own personal tax position on top of the company’s Corporation Tax bill.

Are You a Trader or an Investor?

How you plan to use the property changes the analysis. If you’re buying to renovate and sell on quickly, you’re likely to be treated as a property trader rather than an investor – a limited company structure is usually the more sensible route here, since trading profits are subject to Income Tax rather than the more favourable Capital Gains Tax treatment if held personally. If you’re planning to hold the property and let it out for rental income over the medium to long term, you’re an investor, and the fuller pros and cons set out in this guide apply to you.

How to Set Up a Limited Company for Property Investment

If you decide to go ahead, setting up a limited company for property investment is a straightforward process:

1. Choose a company name and register with Companies House, either directly or through a formation agent.
2. Select the right SIC code(s) – typically 68100, 68209 or 68320 – so the company is recognised as an SPV by mortgage lenders.
3. Appoint at least one director and one shareholder; these can be the same person, or you can bring in additional shareholders from the outset.
4. Set a registered office address – your own address is fine, or you can use an accountant’s office if you’d rather not use a home address.
5. Register the company for Corporation Tax with HMRC, even if you don’t expect to make a profit in the first year.

Getting the SIC code and share structure right from the start matters more than most people expect. Changing them later is possible, but it can delay a mortgage application or add extra accountancy fees – it’s worth speaking to an accountant before you incorporate rather than after.

Beyond the tax numbers, running a portfolio through a limited company also suits landlords who are actively growing their holdings: it’s easier to bring in co-investors as shareholders, present a professional structure to lenders and letting agents, and plan for the business to be passed on to family members or business partners in future. None of this changes the answer for every landlord, though – which is why it’s worth working through the framework below before deciding.

Is Buying Through a Limited Company Right for You?

There’s no single right answer, only the answer that fits your tax position and your plans for the property. Use the summary below as a starting point, then get advice tailored to your circumstances before you commit.

A limited company structure tends to work well if:

• You’re a higher or additional rate taxpayer, so the gap between Income Tax and the Corporation Tax rate is significant
• You plan to build a portfolio of several properties, rather than buying a single buy-to-let
• You intend to reinvest most of your rental income rather than draw it out as salary or dividends straight away
• You want to bring in other shareholders, such as a partner or family member
• Your mortgages are large relative to the rental income, so losing full mortgage interest relief under Section 24 would hit you hard as an individual landlord

Buying personally may still make more sense if:

• You’re a basic rate taxpayer with no plans to move into a higher tax band
• You’re buying a single property and don’t plan to expand
• You want to draw most of the rental income as personal income straight away, since extracting profit from a company as salary or dividends creates a second layer of tax
• You already own the property outright, and the Capital Gains Tax and Stamp Duty Land Tax cost of transferring it into a company would outweigh the ongoing tax benefit
• You value the wider choice and typically lower rates available on personal buy-to-let mortgages over the SPV lending market

Quick snapshot:

This isn’t a substitute for professional advice. An accountant can model the numbers precisely against your own income, mortgage size and plans for the property – but working through this framework first should help you have a more informed conversation with them.

Frequently Asked Questions

The Bottom Line

Buying property through a limited company can be significantly more tax-efficient than buying personally, particularly for higher rate taxpayers building a portfolio – but the SPV route brings its own costs, personal guarantees and administrative demands, and some commonly repeated benefits, like automatic Inheritance Tax relief, don’t hold up to scrutiny for a standard letting business. Take the time to run the numbers for your own situation, and get advice from an accountant and a solicitor before you commit, since the right structure depends on your tax position as much as it does on the property itself.