A limited company deducts the running costs of its property business from rental income, and pays Corporation Tax on what is left. The list of deductible costs looks superficially like the personal one, which is why most guides simply reprint the individual landlord's expense list under a company heading. That misses the point. Four categories work materially differently inside a company, and they are where the money is: finance costs, pre-trading expenditure, capital allowances, and director costs.
Two questions get confused constantly, so it is worth separating them at the outset. Which costs are allowable is a tax question, answered below. What the company costs to run is a cash question, answered in property company running costs. A cost can be large and fully allowable, or small and wholly disallowed. Where an expense category behaves identically in company and personal hands, the complete list of landlord tax deductions carries the detail and is not repeated here. Structural questions about the company itself sit on the property SPV company hub.
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What you can claim through your property company
The statutory test is the same one that applies to any business: the cost must be incurred wholly and exclusively for the purposes of the property business, and it must be revenue rather than capital in nature. A company's UK property business profit is computed using trading-profit principles under CTA 2009, so the mechanics of what qualifies are familiar. What differs is the reliefs stacked on top and the absence of the individual restrictions.
The short version, before the detail:
- Finance costs (mortgage interest, arrangement fees, broker fees): deducted in full, before Corporation Tax.
- Pre-trading expenditure: costs incurred up to seven years before letting starts, treated as incurred on day one.
- Capital allowances: 14% main pool writing-down allowance, 6% special rate, 40% first-year allowance, and 100% full expensing that only companies can use, all subject to the dwelling-house bar.
- Director costs: salary through PAYE, employer pension contributions, and arm's-length management fees.
- Professional and compliance fees: accountancy, company filing, letting-business legal advice.
- Everything else (agent fees, insurance, repairs, service charges): deductible, and identical to the personal treatment.
Finance costs are fully deductible, with no Section 24 restriction
Mortgage interest is the largest single cost in most portfolios, and it is the clearest reason landlords look at companies at all. In a company, interest is an ordinary expense of the property business, deducted from rental income before Corporation Tax is charged. There is no cap, no tapering and no restriction by reference to a basic rate.
In your own name the position is different: Section 24 replaced the finance-cost deduction with a tax reducer worth 20% of the finance cost for 2026/27, rising to 22% from April 2027 under Finance Act 2026. That is the whole of the individual-side story on this page. The mechanics, the calculation order and the knock-on effects on your adjusted net income are set out in mortgage interest deductibility for landlords and the Section 24 complete guide.
Two practical points inside the company. First, the deduction is worth the company's marginal Corporation Tax rate: 19% where augmented profits do not exceed £50,000, 25% above £250,000, and an effective 26.5% on the slice between those limits through marginal relief. The marginal relief is computed under CTA 2010 s.18D using the formula (U − A) × (N/A) × 3/200, where U is the upper limit, A is augmented profits and N is taxable total profits. It is not a separate 26.5% rate applied directly, and the thresholds are divided by the number of associated companies, so a landlord with five single-property SPVs has a £10,000 lower limit and a £50,000 upper limit in each.
Second, a loss created or increased by the interest deduction is more useful in a company. A corporate UK property business loss is carried forward and set against total profits of later periods, rather than being ring-fenced to future property income as it is for an individual.
Capital allowances in a property company
Capital allowances give tax relief on plant and machinery that would otherwise be non-deductible capital expenditure. The rates changed materially in Finance Act 2026, and the gate that decides whether you can claim at all is often missed.
The dwelling-house bar comes first. CAA 2001 s.35 denies plant and machinery allowances for plant used in a dwelling-house. For an ordinary residential buy to let, that removes the furniture, the white goods and the boiler inside the flat, in a company exactly as it does for an individual. What remains claimable is plant in the common parts of a multi-let building (the lift, the communal lighting and heating, the entry system), plant in commercial or mixed-use property, and the company's own equipment: computers, tools, office furniture, commercial vans. Incorporating does not switch the s.35 bar off. Anyone telling you a company can claim capital allowances on a let flat's kitchen is wrong.
Where allowances are available, these are the FA 2026 rates:
| Allowance | Rate | Available to a company? | Note |
|---|---|---|---|
| Annual investment allowance (CAA 2001 s.51A) | 100% up to £1m | Yes | Permanent £1m cap; shared across associated companies |
| Full expensing (CAA 2001 s.45S) | 100% FYA | Yes, companies only | New and unused main-rate plant; not available to individual landlords |
| New first-year allowance (FA 2026 s.29 / CAA 2001 s.45U) | 40% FYA | Yes | New and unused main-rate plant from 1 Jan 2026; not cars, not second-hand |
| Main pool writing-down allowance (CAA 2001 s.56) | 14% | Yes | Cut from 18% by FA 2026 s.28 for periods from 1 April 2026 (CT) |
| Special rate pool (CAA 2001 s.104D) | 6% | Yes | Integral features under s.33A; unchanged by FA 2026 |
| Structures and buildings allowance | 3% straight line | Yes | Non-residential structures only |
Full expensing is the one that is genuinely a company-only advantage. A company buying new and unused main-rate plant will normally claim 100% under s.45S rather than 40% under s.45U, because the 100% is simply better. An unincorporated landlord cannot use full expensing at all and falls back on the annual investment allowance and the 40% first-year allowance. Note also that a chargeable period straddling 1 April 2026 uses a hybrid, time-apportioned writing-down rate between 18% and 14% rather than one or the other. The general mechanics of the pools are covered in writing-down allowance rates, and the specific car rules in writing-down allowances on cars. Cars get no annual investment allowance, no full expensing and no 40% first-year allowance; only new, unused zero-emission cars carry a 100% first-year allowance.
Pre-trading expenditure: s.61 CTA 2009
Costs incurred before the company starts letting are not lost. Section 61 of the Corporation Tax Act 2009 treats expenditure incurred within seven years before a business begins, which would have been deductible had the business already started, as incurred on the first day of that business. The rule is written for trades and applies to a company's property business through the trading-profit computation rules in CTA 2009 Part 4.
In practice this covers a lot of the year-one spend that landlords assume is non-deductible: mortgage broker and lender arrangement fees on the first purchase, accountancy fees for setting the company's records up, legal advice about the letting business (as distinct from the conveyancing on the property purchase itself), travel to view properties once the intention to let is settled, insurance and utilities on a property being prepared for letting, subscriptions and software.
The limits matter as much as the rule. Capital costs stay capital: the property, the Stamp Duty Land Tax on it, the conveyancing on the acquisition and improvement works are not converted into revenue deductions by s.61. Nor is the Companies House incorporation fee, which is a capital cost of creating the company. There is no separate election to file, but the costs have to be identified and brought into the first period's accounts, which means keeping the invoices and dating them. A cost incurred more than seven years before the business begins falls outside the rule entirely.
Director salary, pension and management fees
A company can deduct what it actually pays its director. Your own time and effort is not a cost the company has incurred, so nothing is deductible for the hours you put in unless money moves.
Salary. A salary paid through PAYE is deductible against the company's profits. Employer National Insurance runs at 15% above a £5,000 secondary threshold, so a small salary is normally set with that threshold and the director's own position in mind. It reduces Corporation Tax at the company's marginal rate.
Employer pension contributions. Generally deductible in the period paid where they meet the wholly and exclusively test for the director's role, with no employer National Insurance and no immediate income tax charge on the director. They have to be paid rather than accrued, and the individual's annual allowance applies. For most property companies this is the most efficient of the three routes.
Management fees. A fee paid to you personally, or to a separate management company you own, for genuinely managing the portfolio is deductible if it is commercially justified and set at arm's length. The test is whether a third-party agent doing the same work would charge something like the same amount. A round-sum figure with no service behind it fails the wholly and exclusively test, and HMRC treats inflated connected-party fees as disguised profit extraction rather than a business cost. Document the service, the rate and the third-party comparison before the fee is paid.
One caution. Expense claims are not a route around the extraction rules. Where a director draws money informally and it is not a salary, a dividend or a genuine reimbursed expense, it is a loan to a participator, and the close-company charge under CTA 2010 s.455 applies at 35.75% on amounts still outstanding nine months and one day after the end of the accounting period for loans made on or after 6 April 2026. The mechanics are in director loan account mechanics, and the choice between routes in salary versus dividends for a property SPV and extracting money from a property company.
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Formation and professional costs
The incorporation fee paid to Companies House is capital and is not deductible. For the full picture of what forming and running an SPV costs beyond that filing fee, see our SPV company formation cost guide. Almost everything around the incorporation fee itself is deductible:
- Annual accountancy and Corporation Tax return fees.
- Confirmation statement filing fee.
- Bookkeeping software and payroll bureau costs.
- Mortgage broker fees and lender arrangement fees (revenue finance costs, deductible in full).
- Legal fees on granting a tenancy, on rent recovery and on possession proceedings.
- Professional advice on running the letting business.
Legal and professional fees connected with acquiring or disposing of a property are capital, and go into the base cost for the eventual gain rather than reducing rental profit. That line, revenue versus capital, is where most disallowances arise in practice, not in the identity of the expense.
Costs that are the same either way
These are deductible in a company on exactly the terms they are deductible personally, and there is no company advantage in them: letting agent and management fees, landlord insurance, ground rent and service charges, repairs and maintenance (as opposed to improvements), utilities and council tax during void periods, safety certificates, licensing fees, advertising for tenants, bad debts, and business use of a vehicle. For the detail on each, use the complete landlord deductions list rather than a company-specific source, because the rules are the general property-business rules.
Company versus individual: where the treatment actually differs
| Cost | Limited company | Individual landlord |
|---|---|---|
| Mortgage interest and finance costs | Deducted in full before Corporation Tax | 20% tax reducer for 2026/27, 22% from April 2027 (Section 24) |
| Full expensing (100% FYA, s.45S) | Available | Not available |
| 40% FYA and £1m AIA | Available | Available |
| Plant inside the let dwelling | Barred by CAA 2001 s.35 | Barred by CAA 2001 s.35 |
| Pre-trading costs | 7 years, s.61 CTA 2009, treated as day one | 7 years, equivalent income tax rule |
| Director salary and employer pension | Deductible against profits | No equivalent; you cannot employ yourself |
| Formation fee | Capital, not deductible | Not applicable |
| Property business loss | Carried forward against total profits | Carried forward against future property profits only |
| Getting the profit into your hands | Second layer: dividends at 10.75% / 35.75% / 39.35% | No second layer; taxed once |
Worked example: £24,000 rent, company against personal ownership
One buy to let. Annual rent £24,000, mortgage interest £9,000, other allowable running costs £3,000. No capital allowances (an ordinary flat, s.35 bar applies). The landlord is a higher-rate taxpayer with other income above the higher-rate threshold, and the company has no associated companies and profits below £50,000.
| Line | Limited company | Own name (higher-rate taxpayer) |
|---|---|---|
| Rent | £24,000 | £24,000 |
| Less other running costs | (£3,000) | (£3,000) |
| Less mortgage interest | (£9,000) | Not deductible |
| Taxable profit | £12,000 | £21,000 |
| Tax before relief | £2,280 (Corporation Tax at 19%) | £8,400 (income tax at 40%) |
| Section 24 finance-cost reducer | Not applicable | (£1,800) at 20% of £9,000 |
| Tax due | £2,280 | £6,600 |
| Interest actually paid | Already deducted above | (£9,000) |
| Cash left after tax | £9,720, retained in the company | £5,400, in your hands |
| If the whole profit is drawn as a dividend | £9,720 less 35.75% = £6,245 | Not applicable |
Read the last two rows together, because that is where the argument is usually lost. On retained profit the company is ahead by £4,320 in this example, which is the whole case for holding property corporately when you are reinvesting. Once every pound is extracted as a dividend at the upper rate, the gap narrows to £845. The company still wins here, but by a margin that a few hundred pounds of extra accountancy and filing cost can erase. The finance-cost deduction is doing the work; the second layer of tax on extraction is taking most of it back.
Change one input and the conclusion moves. Raise the interest to £14,000 and the company's advantage widens sharply. Take the profit above £50,000 and marginal relief lifts the effective rate to 26.5% on the slice. Draw nothing and reinvest, and the £4,320 compounds. The Section 24 rise to 22% in April 2027 narrows the individual's disadvantage slightly, not enough to reverse it.
What HMRC challenges most often
Three recurring points, in order of how often they cost landlords money:
- Improvements booked as repairs. Replacing a roof like for like is a repair; replacing it with something materially better is an improvement, and improvement spend is capital. This is the single most common adjustment on a property company enquiry, and it is not a company-specific issue.
- Connected-party management fees with no service behind them. Covered above. The fee has to be earned.
- Personal costs run through the company. A vehicle used mostly privately, a home office claimed at a full commercial rate, travel that is really a family visit. The wholly and exclusively test does not admit apportionment for a cost with a genuine dual purpose unless a definite part is identifiable as business.
The relevant HMRC guidance sits in the Property Income Manual, the Business Income Manual on wholly and exclusively, and the Capital Allowances Manual. The statutory sources cited on this page are CTA 2009 s.61, CAA 2001 s.35, CAA 2001 s.45S and gov.uk marginal relief guidance.
Rates and thresholds on this page reflect Finance Act 2026 and the 2026/27 tax year. Verify against current guidance before acting, and take advice on your own figures.