The choice between owning property through a limited company or personally remains one of the most significant decisions facing UK landlords in 2026. With Section 24 mortgage interest restrictions now fully implemented and corporation tax rates changing, the tax implications can vary dramatically depending on your circumstances.
Section 24 Impact and Tax Rate Comparison
Section 24 restricts mortgage interest relief to 20% for personally-owned buy-to-let properties. This means higher-rate taxpayers cannot offset their full mortgage costs against rental income, creating a significant tax disadvantage. For a landlord with £50,000 rental income and £25,000 mortgage interest, the difference is substantial. Under the old system, a 40% taxpayer could reduce their taxable profit by the full £25,000. Now, they can only claim 20% relief (£5,000), leaving £45,000 subject to income tax instead of £25,000. This restriction doesn't apply to limited companies, which can still deduct mortgage interest as a business expense against corporation tax.
This fundamental difference interacts with the prevailing tax rates. Corporation tax rates for 2026/27 are 19% on profits up to £250,000 (small profits rate) and 25% on profits above £300,000 (main rate). Compare this to income tax rates for personally-owned property profits: 20% basic rate, 40% higher rate (£50,270 - £125,140), and 45% additional rate (above £125,140). For landlords with substantial rental profits, the 19% corporation tax rate can provide significant savings compared to 40% or 45% income tax rates.
Real-World Tax Comparison Examples
For a portfolio generating £75,000 annual profit, a higher-rate taxpayer owning personally would pay £30,000 income tax (40% × £75,000), plus potential restrictions under Section 24 if mortgage costs are involved. Through a limited company, corporation tax would be £14,250 (19% × £75,000). The company route typically saves tax even after extraction costs, particularly for higher-rate taxpayers reinvesting profits rather than withdrawing them immediately.
For a small portfolio with £25,000 profit, personal ownership often remains more tax-efficient for basic-rate taxpayers. The 20% income tax rate matches the dividend tax allowance, and incorporation costs may outweigh benefits. However, if mortgage restrictions under Section 24 push rental income into the higher-rate band, incorporation becomes more attractive even for smaller portfolios.
Capital Gains Tax Considerations
Personal ownership typically provides better capital gains treatment. Individuals can claim the annual exempt amount (£3,000 for 2026/27), pay CGT at 18% (basic rate) or 24% (higher rate), and may claim principal private residence relief for former homes. Limited companies pay corporation tax on capital gains at 19% or 25%, but distributing these gains to shareholders creates dividend tax charges, potentially resulting in higher overall tax rates.
Administrative Burden and Costs
Limited company ownership requires annual accounts and Corporation Tax returns, Companies House filings, professional accountancy fees (typically £1,500-£3,000 annually), and PAYE and dividend administration. Personal property ownership involves simpler Self Assessment returns, though Making Tax Digital for Income Tax from April 2026 will increase record-keeping requirements for both structures.
Stamp Duty Land Tax and Mortgage Differences
Limited companies face a 5% SDLT surcharge on residential property purchases, in addition to standard rates. This typically adds £15,000 to £25,000 to the purchase costs of an average buy-to-let property. Individual purchasers also face the 5% surcharge for additional properties, so there's no difference in most buy-to-let scenarios. However, companies cannot benefit from first-time buyer relief or main residence exemptions.
Limited company mortgages typically carry higher interest rates (often 0.5-1% above personal BTL rates) and lower loan-to-value ratios. Many lenders also require personal guarantees from directors. However, companies can deduct the full mortgage interest against corporation tax, while personal owners face Section 24 restrictions. For highly leveraged portfolios, this tax benefit often outweighs the higher borrowing costs.
When to Choose a Limited Company vs. Personal Ownership
Limited company structures typically benefit landlords who are higher or additional rate taxpayers, have significant mortgage borrowings affected by Section 24, plan to reinvest profits rather than withdraw them immediately, want to involve family members in the business, or operate substantial property portfolios (typically 4+ properties).
Personal ownership often suits landlords with small portfolios generating basic-rate taxable income, minimal mortgage borrowings (less affected by Section 24), plans to sell properties in the short to medium term, or former homes that may qualify for principal residence relief.
Making the Switch: Transfer and Incorporation Considerations
Transferring existing properties from personal to company ownership typically triggers capital gains tax and stamp duty charges. The costs can be substantial, making incorporation more suitable for new property purchases rather than existing portfolios. Some landlords operate hybrid structures, keeping existing properties personally while purchasing new properties through companies. This approach avoids transfer costs while gaining company benefits for future growth.
Getting Professional Advice
The choice between limited company and personal ownership depends heavily on individual circumstances, including income levels, mortgage arrangements, family situation, and long-term plans. Tax legislation continues to evolve, and what works today may not remain optimal in future years. Before making incorporation decisions, speak to a specialist property accountant who can model the tax implications based on your specific portfolio and circumstances. Our tax calculators can provide initial estimates, but professional advice is essential for significant structural decisions. The 2026 tax landscape heavily favours limited company structures for most higher-rate taxpayer landlords, but the decision requires careful analysis of both immediate tax implications and long-term strategic considerations.