Whether to hold UK residential property in your own name or through a limited company is rarely a clean win for either side. The honest answer in 2026 is that it depends on three things: your income tax band, how much you have borrowed, and whether you draw the rent to live on or leave it to grow. A geared higher-rate landlord building a portfolio leans heavily towards a company. A basic-rate taxpayer with one mortgage-free flat usually does not. This guide compares the two routes on the points that actually move the numbers, with worked figures, and flags the traps that catch landlords who incorporate on a rule of thumb.
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The headline comparison
Before the detail, here is how the two structures line up on the levers that decide most cases. No single row settles the question; the interaction between your tax band and your gearing does.
| Factor | Personal ownership | Limited company |
|---|---|---|
| Tax on rental profit | Income tax at 20% / 40% / 45% | Corporation tax 19% to 25% (about 26.5% marginal) |
| Mortgage interest | Restricted: 20% basic-rate credit only (Section 24) | Deducted in full before corporation tax |
| Getting the money out | Already yours after tax | Second tax charge on dividends or salary |
| CGT on sale | 18% / 24%, £3,000 annual exempt amount | Corporation tax on gain, then dividend tax to extract |
| SDLT on purchase | 5% additional-dwellings surcharge | Same 5% surcharge (no first-time-buyer relief) |
| Making Tax Digital | MTD for ITSA from April 2026 (£50,000) | Outside MTD; files annual CT600 |
| Admin and cost | Self Assessment, simpler | Accounts, CT600, Companies House, payroll |
Section 24 is the reason most leveraged landlords incorporate
Section 24 is the single change that pushed incorporation from a niche move to a mainstream question. For an individual landlord, mortgage interest and other finance costs are no longer deducted from rental profit. Instead you receive a tax credit worth 20% of those costs for 2026/27, capped at the lowest of three figures: 20% of the finance costs, 20% of the rental profit before finance costs, or 20% of your taxable income above the personal allowance.
The effect on a higher-rate taxpayer is blunt. Take a landlord with £50,000 of rental income and £25,000 of mortgage interest. Before Section 24, taxable profit was £25,000 and a 40% taxpayer paid £10,000. Today the full £50,000 is taxable, producing £20,000 of tax at 40%, reduced by a £5,000 credit (20% of the £25,000 interest), leaving £15,000 payable. The landlord earns the same £25,000 in economic terms but pays £15,000 of tax on it, an effective rate of 60% on the real profit. A company in the same position deducts the £25,000 interest in full, taxes the remaining £25,000 at 19%, and pays £4,750. That gap is why heavily mortgaged higher-rate portfolios so often move into a company.
Section 24 does not apply to companies at all, because it is an income tax rule and a company pays corporation tax. It is also why a basic-rate landlord feels far less pressure: their income tax rate and the credit rate are both broadly 20%, so the restriction barely bites. Our Section 24 versus incorporation comparison works through where the crossover point sits.
Corporation tax versus income tax on the same profit
Personal rental profit is taxed alongside your other income at 20% up to £50,270, 40% from £50,270 to £125,140, and 45% above that. Corporation tax for 2026/27 is 19% on profits up to £50,000 (the small profits rate), 25% on profits above £250,000 (the main rate), and a tapered marginal rate between the two that works out at roughly 26.5%. Most single landlord companies sit comfortably in the 19% band.
So on profit retained inside the structure, the company looks dramatically cheaper: 19% against 40% or 45%. The catch is that the company's profit is the company's, not yours. The moment you need that money personally, a second tax charge lands. For 2026/27 dividends carry a £500 allowance and are then taxed at 10.75% (basic), 35.75% (higher) and 39.35% (additional). The genuine comparison is not 19% against 40%; it is corporation tax plus extraction tax against income tax on the personal route.
This is why the company wins decisively for landlords who reinvest. If profit stays in the company to fund the next deposit, only corporation tax has been paid and the full balance compounds. A landlord drawing every penny of rent to live on captures far less of the advantage, because the dividend tax on extraction eats much of the corporation-tax saving. Our salary versus dividends guide models the extraction layer in detail.
Extraction: the second layer personal owners do not have
Whatever you read about corporation tax, remember that money inside a company is not spendable until you take it out, and taking it out is taxed. There are three main routes, usually used together.
A director's loan is the cleanest. When you incorporate by transferring property in, the company often owes you a credit balance equal to the value transferred (subject to the SDLT and CGT points below). Repaying that loan to yourself is tax-free, because it is the return of your own capital, not income. Founders typically draw this down first. The trap is that it runs out: a credit balance can be exhausted in a few years if you draw heavily, after which you are back to dividends and salary. Our director's loan repayment strategy covers sequencing.
Dividends come after the loan and are taxed at the rates above, but only on profits the company has actually made and after corporation tax. Salary uses your personal allowance and basic-rate band efficiently and is deductible for the company, but attracts National Insurance once it passes the secondary threshold. A landlord who owns the company alone, and a couple who split shares to use two sets of allowances, will reach quite different optimal mixes, which is why this is modelled per person rather than from a template.
Capital gains tax on eventual disposal
For a near-term sale, personal ownership usually wins. An individual selling residential property pays CGT at 18% (within the basic-rate band) or 24% (above it), keeps the £3,000 annual exempt amount for 2026/27, can transfer a share to a spouse beforehand to use two exemptions and potentially two basic-rate bands, and may claim private residence relief on a property that was once a main home.
A company has none of that. It pays corporation tax on the whole gain at 19% to 25% with no annual exemption, and to get the proceeds to you it must declare a dividend, adding dividend tax on top. The combined effective rate can comfortably exceed the personal 18%/24%. The company only pulls ahead on disposal if the proceeds stay inside the company and are reinvested into the next property, so the second charge is deferred indefinitely. If your plan is to sell up and bank the cash, model the full two-layer cost before assuming the company is cheaper. The CGT rates explainer sets out the personal numbers in full.
The cost of moving existing property into a company
This is where many incorporation plans fall apart. Transferring property you already own into a company is, for tax, a sale to a connected party at market value, and it triggers two charges at once.
First, capital gains tax. You are treated as disposing of the property at its current market value, so a property that has risen sharply since purchase can generate a real CGT bill even though no cash changes hands. Section 162 incorporation relief can defer this where you transfer a genuine property business as a going concern, with all the business assets other than cash, wholly or partly in exchange for shares. HMRC tests whether residential letting is a real business rather than passive investment, usually looking for a portfolio under active management; a single rented flat rarely qualifies.
Second, SDLT. The company is buying the property, so it pays stamp duty on the market value, including the 5% additional-dwellings surcharge. On a sizeable portfolio this can be a substantial cash cost that lands immediately. A genuine, pre-existing letting partnership can reduce the chargeable consideration under the partnership rules in Schedule 15 of the Finance Act 2003, but this needs a real partnership with its own returns and joint borrowing, not one created the week before incorporation. Our guide to the SDLT cost of incorporating works through when the charge bites and when relief is realistic.
Because these transfer costs are real and immediate, many landlords leave existing property where it is and use a company only for new purchases. That hybrid avoids the entry cost while capturing full interest relief and corporation tax rates on future growth.
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Stamp duty, mortgages and ATED in practice
On a standard buy-to-let purchase there is usually no SDLT difference between the two routes, because an individual buying an additional property pays the same 5% surcharge a company pays. The company simply cannot use first-time-buyer relief or main-residence rules, which it would never qualify for anyway. One company-only cost to watch is the Annual Tax on Enveloped Dwellings, which can apply where a company holds a single dwelling worth more than £500,000, although the relief for property let to unconnected tenants on commercial terms covers most ordinary buy-to-let companies provided the relief is claimed on the return.
Company mortgages typically price a little above personal buy-to-let rates and offer lower loan-to-value, and most lenders want personal guarantees from directors. Against that, the company deducts the full interest before corporation tax while a personal owner is stuck with the Section 24 credit, so for a geared higher-rate landlord the tax saving frequently outweighs the slightly dearer borrowing.
Making Tax Digital changes the admin picture
From 6 April 2026, Making Tax Digital for Income Tax is mandatory for individual landlords with qualifying income above £50,000, dropping to £30,000 from April 2027 and £20,000 from April 2028. That means digital records and quarterly updates rather than a single annual return. Limited companies are outside MTD for ITSA entirely; they continue to file an annual CT600. Some landlords above the threshold treat the quarterly burden as a nudge towards incorporation, but a company brings its own filing obligations (statutory accounts, the corporation tax return and Companies House confirmation statements), so this rarely tips the decision on its own. Our MTD for property income guide sets out who is caught and when.
What changes in April 2027
From 6 April 2027, individuals' property income in England, Wales and Northern Ireland is taxed at separate rates of 22% basic, 42% higher and 47% additional, enacted by Finance Act 2026 (only Scotland is carved out, where Holyrood sets the rates). Crucially, the Section 24 finance-cost credit rises in step to 22%, so a basic-rate landlord sees no new wedge open up, because the rate on their property income and the rate of the credit move together. For higher and additional-rate landlords the credit improves slightly from 20% to 22%, but it still sits far below their 42% or 47% rate, so the finance-cost penalty that drives incorporation remains.
The practical read is that the 2 percentage point rise on personal property income modestly widens the personal-versus-company gap for geared higher-rate landlords, since corporation tax rates are unchanged, but it does not rewrite the decision. The fundamentals (your band, your gearing, your extraction plans) still dominate. Our analysis of how the 2027 rates affect the incorporation decision goes deeper.
Who each structure suits
A limited company tends to win for the higher or additional-rate taxpayer with meaningful mortgage borrowing hit hardest by Section 24, the landlord who reinvests profit rather than spending it, the investor building a portfolio over years, and families who want to split income across spouses or adult children through share classes. The company route rewards patience: the longer the profit compounds inside it before extraction, the better it looks.
Personal ownership tends to suit the basic-rate taxpayer whose income tax rate and the Section 24 credit broadly match, the owner with little or no borrowing, anyone planning to sell within a few years who values the CGT annual exempt amount and private residence relief, and landlords who simply want the lighter administration of Self Assessment. There is no property count that flips the answer; a single highly geared property held by an additional-rate taxpayer can justify a company, while ten lightly mortgaged properties owned by a basic-rate taxpayer may not.
How to decide without guessing
The numbers in this guide are illustrative; your own answer depends on figures only you have. Before incorporating, model three things together: the annual income tax saving the company delivers on your actual gearing and band, the extraction cost of getting the money you need to live on, and the one-off CGT and SDLT cost of moving any existing property in. A plan that looks great on the annual saving alone can fail once the entry cost and extraction tax are added. Tax rules also keep moving, as the April 2027 change shows, so a structure that suits you now should be reviewed periodically. Speaking to a specialist property accountant who can run your specific portfolio through all three tests is the difference between a decision that holds up and one that costs you. Our property tax calculators give a useful first estimate before that conversation.