Buy-to-Let Through a Limited Company in 2026: Tax, Mortgages and When It Makes Sense

The Growth of Corporate Landlordism

The number of buy-to-let mortgages taken out by limited companies has grown dramatically since 2016, when Section 24 of the Finance (No. 2) Act 2015 began to restrict mortgage interest relief for individual landlords. Estimates from UK Finance suggest that by 2024, the majority of new buy-to-let mortgage applications were made by limited companies. A 2026 survey of landlords with portfolios of four or more properties found that the majority operated some or all properties through companies.

The trend is driven by a clear tax rationale: companies can still deduct mortgage interest as a business expense (the Section 24 restriction applies only to individuals), and corporation tax rates — while increased in 2023 — remain lower than higher-rate income tax for many landlords.

However, incorporation is not automatically advantageous. The decision requires careful modelling of both the ongoing tax position and the one-off costs of transferring existing properties to a company structure.

The Core Tax Advantage: Deductibility of Mortgage Interest

Under the current regime for individual landlords, mortgage interest is not deductible from rental income when calculating taxable profit. Instead, a 20% tax credit is applied. For a higher rate (40%) or additional rate (45%) taxpayer, the effective relief is lower than the actual cost of borrowing.

A limited company pays corporation tax on net profit after deducting all business expenses including mortgage interest. For a company with profits between £50,000 and £250,000, the marginal corporation tax rate is 25% (the main rate from April 2023). For small companies with profits below £50,000, the small profits rate is 19%.

This means a highly mortgaged portfolio that produces minimal net profit (because most income is absorbed by interest) may attract little or no corporation tax, while the same portfolio held individually could produce a substantial income tax bill on the gross rent.

Extracting Profits: The Dividend Tax Layer

The tax advantage of a company is not costless. While the company pays lower tax on net profits, extracting those profits creates a further tax charge. The company can pay:

**Salary to director-shareholders:** Deductible against corporation tax. Subject to income tax and National Insurance above the employment allowance. A low salary (typically around the NI primary threshold, around £12,570 in 2025/26) is tax-efficient.

**Dividends:** Taxable at dividend rates (currently 8.75% basic rate, 33.75% higher rate, 39.35% additional rate for 2025/26) above the dividend allowance (£500 for 2025/26). Dividends are not deductible against corporation tax.

The combined effective rate of corporation tax plus dividend tax is typically 40–50% for a higher rate taxpayer, compared to 40% income tax for an individual. The company structure is most tax-efficient where profits are retained within the company for reinvestment (for example, building a portfolio) rather than extracted as income.

Mortgages for Limited Companies — SPVs and Lending

Most buy-to-let lenders require properties held in a company to be held in a Special Purpose Vehicle (SPV) — a company set up specifically to hold property rather than a trading company. The standard SIC code used is 68100 (buying and selling of own real estate) or 68209 (other letting and operating of own or leased real estate).

The buy-to-let mortgage market for companies has deepened considerably since 2016. Most major buy-to-let lenders now offer company landlord products, though the rates have historically been slightly higher than equivalent individual landlord mortgages. Criteria vary by lender, but typical requirements include:

• The SPV must have no more than four directors/shareholders.
• All directors/shareholders must provide personal guarantees.
• The company must have been incorporated (many lenders require an active company rather than a newly formed shelf company).
• Standard rental stress tests apply (rent must cover the mortgage payment at a stressed rate, typically 125–145% at a notional rate).

The Incorporation Decision: Existing Portfolios

For landlords considering moving an existing personal portfolio into a company, the one-off costs are significant:

**Stamp Duty Land Tax:** Transferring property to a connected company is treated as a sale at market value. SDLT (including the 3% additional dwelling surcharge) is payable by the company. A portfolio worth £800,000 could attract SDLT of £50,000+.

**Capital Gains Tax:** The transfer is a disposal for CGT purposes at market value. Gains accrued since purchase (after deducting allowable costs and any reliefs) are taxable in the year of transfer. Incorporation relief under section 162 TCGA 1992 may defer CGT if the property activity constitutes a property business — a fact-sensitive test.

**Legal costs:** Two sets of conveyancing are required (selling from personal name, buying into company). Lender consent to transfer (or refinance) is needed.

**Break-even period:** Most financial modellers estimate that for a smaller portfolio (2–4 properties), the upfront costs take 10–15 years to recover through ongoing tax savings, depending on the landlord's marginal rate and the level of mortgage debt. For a larger, highly leveraged portfolio held by a higher rate taxpayer, the payback period is shorter.

New Purchases — When Company Ownership Makes Sense

For landlords purchasing new properties (rather than transferring existing ones), the incorporation decision is simpler: there is no existing gain to crystallise and no SDLT on a prior holding. The decision rests primarily on:

• Whether the landlord is a higher rate taxpayer (company structure almost always advantageous).
• Whether profits will be retained in the company or extracted immediately.
• Whether the borrower can access adequate company buy-to-let mortgage products at competitive rates.
• Whether the management overhead of running a company (annual accounts, corporation tax returns, confirmation statements at Companies House) is proportionate to the tax saving.

For a basic rate taxpayer planning to extract all rental profits immediately, the company structure may offer little net advantage after the costs of extraction.

Getting landlord-specialist accountancy advice before committing to a structure is not optional — it is essential. The interaction between Section 24, corporation tax, dividend tax, Capital Gains Tax and inheritance tax planning is sufficiently complex that generic advice can be genuinely costly.