Answers · UK 2025/26
Should I buy a rental property in a limited company or personally?
It depends on your tax rate and plans. Higher-rate landlords often favour a limited company because profits are taxed at 19% to 25% Corporation Tax with full mortgage interest deductibility, versus up to 45% Income Tax personally with only a 20% interest credit.
Full answer
Owning buy-to-let through a limited company changes how profit is taxed. Personally, rental profit is added to your income and taxed at 20%, 40% or 45%, and mortgage interest only earns a 20% basic-rate tax credit rather than being a deductible cost. Inside a company, profit is taxed at Corporation Tax rates - 19% on profits up to GBP 50,000, 25% from GBP 250,000, with marginal relief (fraction 3/200) between - and mortgage interest is fully deductible as a business expense. Worked example: GBP 10,000 profit before GBP 4,000 interest. A higher-rate individual is taxed on the full GBP 10,000 at 40% (GBP 4,000) less a GBP 800 interest credit = GBP 3,200 tax. A small company deducts the interest first (GBP 6,000 profit) and pays 19% = GBP 1,140 - but the money is then inside the company, and extracting it as dividends triggers dividend tax (10.75% basic, 35.75% higher, after the GBP 500 allowance). The company route suits higher-rate landlords building a portfolio who reinvest rather than draw income. Drawbacks: company buy-to-let mortgages often have higher rates and fees, you cannot use your personal CGT annual exempt amount on sale, accountancy costs are higher, and transferring an existing personal property into a company is itself a sale that can trigger SDLT and CGT. Get advice for your situation. Use the corporation tax calculator and the dividend tax calculator to compare extraction. Confirm rules on gov.uk.
Try the calculator
More answers
This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.