Should you set up a Limited Company for your buy-to-let properties?

With over 400,000 buy-to-let companies now operating in the UK, a record number of landlords are choosing to purchase and manage rental properties through limited companies. According to a recent article from This is Money, the number of incorporated landlords has more than doubled since 2017, driven largely by tax changes, mortgage restrictions and portfolio expansion strategies. But is going down the limited company route right for you?

Let’s explore the pros and cons and what you need to know before setting one up.

Pros of a Limited Company

1. Corporation Tax benefits

One of the biggest advantages is taxation. Limited companies pay corporation tax on profits (ranging from 19% - 25%), which can be significantly lower than higher-rate income tax for individuals. For landlords receiving sizeable rental income, this could lead to substantial savings.

2. Full mortgage interest relief

Private landlords can no longer deduct all mortgage interest from rental income before calculating tax. Instead, they receive a flat 20% tax credit. But limited companies can still deduct 100% of mortgage interest as a business expense, a key reason many investors are incorporating.

"As mortgage interest is a legitimate business expense for limited companies, it can be deducted in full, allowing landlords to keep more of their rental income." – This is Money

3. Portfolio growth

According to Landlord Today, 73% of landlords with more than 11 properties plan to buy through a limited company. It’s a popular structure for those scaling up because profits can be reinvested directly into the company, avoiding personal tax until dividends are drawn.

4. Estate planning and succession

Owning property via a company structure can simplify inheritance tax planning, allowing shares in the company to be passed on rather than the property itself, which can offer more flexibility in estate planning.

Cons of setting up a Limited Company

1. Initial setup and transfer costs

If you already own property in your personal name, transferring it to a company can trigger Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT), which is potentially costly. While Incorporation Relief may be partially available, it comes with strict criteria, such as running the property portfolio as a business.

“Landlords who restructure existing portfolios into a company often face a hefty tax bill unless carefully planned.” – Landlord Today 

2. Higher mortgage rates and fewer products

Buy-to-let mortgages for limited companies often come with higher interest rates, stricter lending criteria and fewer available options. Though more lenders are entering the market, individual landlords still typically get better deals.

“Average interest rates on limited company buy-to-let mortgages remain higher than those offered to individual landlords.” – This is Money

3. Ongoing administration and costs

Running a limited company comes with legal responsibilities, filing annual accounts, submitting corporation tax returns, paying for accountants and ensuring proper record-keeping. This admin can add time and financial costs.

Summary: Is it worth it?

The shift toward limited companies is gaining momentum, and for good reason. For landlords planning to expand their portfolios, maximise tax efficiency and keep more rental income, the benefits of incorporation can outweigh the drawbacks, particularly if starting a fresh or buying new properties.

However, for landlords with just one or two properties or those concerned about mortgage costs and admin, sticking with personal ownership may still make more sense.

Before making the switch, it’s crucial to:

• Speak to a property tax advisor or accountant
• Consider the long-term goals of your rental business
• Evaluate the short-term costs vs. long-term savings

Speak to our teams today about your property goals or let them help you get in touch with our expert teams in tax and finance.  

Disclaimer: This article does not constitute financial advice; it is for informational purposes only and professional advice on your situation should be sought.

Sources:

Most landlords who expand portfolios operate company structures – Landlord Today

Buy-to-let limited companies hit record high – This is Money