prabhu
Becoming a landlord in the UK is a way to earn a steady income over the years. It is essentially buying a long-term asset – one that has the potential to build equity over time while also providing rental payments from tenants.
So, what about limited company buy to lets? Is that still a good method of investing for UK landlords?
What is a limited company buy to let?
First, let’s cover exactly what a limited company buy to let is.
A limited company buy to let is the process of buying a rental property via a business entity (rather than buying it in your own name). This became more popular because of some major tax changes in the UK in 2016.
Specialist brokers like Commercial Trust UK are in the perfect position to help you find a suitable mortgage, as they dedicate themselves to property investment finance solutions.
In Section 24, it was stated that the tax relief for individual landlords would be gradually withdrawn in stages from April 2017 to April 2020, at which point the relief was completely removed to be replaced by a flat 20% tax credit.
As a result, many landlords moved towards limited company buy to lets for tax efficiency, as limited companies could still claim relief on mortgage interest. Is this still beneficial now, though?
3 reasons a limited company buy to let is still worth it for UK landlords
1. Interest deduction
Arguably, the biggest benefit of a limited company buy to let is that it allows landlords to deduct 100% of their mortgage interest as a business expense, when calculating taxable profits. The same cannot be done for personal ownership of a property. As such, landlords may end up paying less tax, particularly if they are higher rate tax payers.
Rather than paying personal income tax, businesses are charged corporation tax. Incorporation is not always the right choice, so professional tax advice is essential.
2. Rental income tax surcharge
In the Autumn Budget 2025, Chancellor of the Exchequer Rachel Reeves announced the introduction of a 2% tax increase on rental income for landlords who own property in personal name.
Whilst limited company landlords also found they will be subject to additional tax on dividends (of amounts equal to or over £500), this penalty is not expected to be as significant as the 2% on rental income.
3. The chance to pass wealth on
Owning your property through a company rather than your own name can even make it easier to pass on your wealth to family members.
For example, rather than transferring an entire property, you can instead gift shares of the company (that owns the properties) to family members. You can even keep control of the company while paying family members dividends.
What about the reasons not to?
Keep in mind that limited company buy to lets might not work for every landlord despite the clear benefits.
Some reasons not to go down this path include:
- Paying higher mortgage costs
- More administrative effort
- Paying more dividend tax
- More tax paid with property transfers
Be aware that if you switch a property from personal name to limited company ownership, you are essentially selling the property to the company structure, despite the fact you are the director of that company, which means you pay stamp duty land tax.
It may be advantageous to only buy further properties through a limited company and keep your existing properties as they are – this is why professional tax advice is essential, the wrong decision can be very costly.
So – is it worth it?
It truly depends on your situation and the biggest consideration by far is the financial implications relating to tax.
If you are a higher-rate taxpayer in the UK – i.e., paying 40% or more in tax on your earnings – then it may make sense. This is because you may pay a lot less in corporation tax (up to 25%), which could save you a lot of money.
Succession planning is also a key consideration, incorporation may help you achieve efficiencies and be beneficial if you are planning to pass on property you own to relatives.
A company structure can also retain any profits made from rental income, without you as a director having to extract the profit and be taxed on it. By keeping the profit within the company you can build up money to buy more properties.
The one essential take away is that, if you are in any doubt relating to any of these issues, you should get professional tax advice. A mortgage broker can help you secure a limited company buy to let mortgage, but they cannot give you tax advice on whether or not taking one is the right choice for you.
