Guide · 10 min read
Buying rental property through a limited company: the tax treatment, the mortgage mechanics, the deposit, the drawbacks, and the cases where personal name still wins.
Written by Matt Lenzie · Published 10 June 2026
Advice from
Matt Lenzie · 25+ year career banker (Bank of Scotland, Lloyds Banking Group). £300m+ raised for property clients.
25+ year career banker (Bank of Scotland, Lloyds Banking Group). £300m+ raised for property clients.
Buying to let through a limited company means a company you own, rather than you personally, purchases the rental property, takes the mortgage and receives the rent. The company is usually a special purpose vehicle (SPV): a limited company registered at Companies House under property SIC codes whose only activity is holding rental property.
A decade ago this was a niche structure. Today it is the default for new purchases by higher-rate taxpayers, and the lender market has rebuilt itself around that fact, with a deep panel of specialists competing for company business. But "most landlords now do it" is not a reason to do it, and the structure carries genuine costs alongside its genuine advantages. This guide lays out both directions of the comparison, then the mechanics: tax, mortgage, deposit, and the position if you already own property personally.
Legally, the company is the purchaser. The mortgage offer is issued to the company, the title is registered in the company's name, the tenancy agreements are between tenant and company, and the rent lands in the company bank account. You sit one layer back, as shareholder and director: you control the company, the company owns the asset.
That layer changes three things in substance. The income is the company's, taxed under corporation tax rather than your income tax. The debt is the company's, though lenders will require your personal guarantee. And your relationship with the money becomes two-stage: the company makes profit, then you decide how much to extract and how, with each stage taxed on its own rules. Nothing about day-to-day landlording changes: same tenants, same repairs, same letting agent, different name on the title and the tax return.
The case for the company rests on two tax mechanics and one lending mechanic.
Mortgage interest is fully deductible. Since April 2020, Section 24 restricts personal-name landlords to a 20% basic-rate credit on their finance costs. A company deducts every pound of mortgage interest before tax is calculated. On a leveraged property held by a 40% taxpayer, this is normally the single largest line in the comparison; our Section 24 guide shows the worked numbers.
Profits are taxed at corporation tax rates. 19% on profits to £50,000 and 25% above £250,000, with marginal relief between, against 40% or 45% on the same profit in a higher-rate individual's hands. Profits retained in the company compound at that lower rate into the next deposit.
The stress test is friendlier. Lenders assess company applications at a 125% interest cover ratio rather than the 145% applied to higher-rate personal borrowers, at a stress rate of about 5.5%, consistent with the PRA's SS13/16 expectations. The identical rent supports a meaningfully larger loan through the company.
The case against is just as concrete, and we set it out below. The decision is arithmetic: for a higher-rate taxpayer with 75% leverage who reinvests profits, the company usually wins clearly. For a basic-rate taxpayer, a cash buyer, or a landlord living on the rent, it often loses. Run your own figures through our limited company vs personal calculator rather than borrowing anyone else's conclusion.
The company calculates profit the traditional way: rent, less letting costs, less the full mortgage interest. Corporation tax applies to the result, at 19% for small profits, tapering up through marginal relief to 25%. Note that the £50,000 and £250,000 thresholds are divided between associated companies, so a landlord with several companies reaches the higher rates sooner, a detail worth an accountant conversation before you multiply entities.
Deductibility runs wider than interest, for completeness: letting agent fees, repairs and maintenance, insurance, accountancy, and mortgage arrangement fees all come off before the corporation tax line, broadly as they would for an individual. The structural difference is the interest, restricted to a 20% credit personally, deducted in full corporately, and the rate applied to whatever remains.
Then comes extraction, the half of the story enthusiasts skip. Money left in the company has only borne corporation tax. Money you draw out bears more: dividends carry dividend tax at your personal rates, salary carries income tax and National Insurance. A landlord who extracts everything each year keeps much less of the company advantage than one who compounds retained profit into the next purchase. One clean exception: if your deposit went in as a director's loan, the company can repay that loan to you tax-free as cash allows, which is why the loan paperwork matters from day one. The full picture, including the position on an eventual sale, is in our limited company buy-to-let tax guide.
Five, none fatal, all real:
Personal guarantees deserve their own mention: the limited liability of the company does not shield you from the mortgage, because every lender requires directors to guarantee it. Our personal guarantees guide explains what you are actually signing.
A limited company buy-to-let mortgage follows the same arc as a personal one, with company-shaped packaging. The lender wants the certificate of incorporation, property-only SIC codes (68100 or 68209), the shareholding structure, the directors' details and credit consents, the deposit's provenance, and signed personal guarantees with independent legal advice. Affordability is the rent against the 125% ICR at the stress rate; most products are interest-only; 75% LTV is the structural norm.
The market is deep: specialist SPV lenders such as Paragon, Kent Reliance, Fleet Mortgages and Foundation Home Loans, intermediary-only building societies including The Mortgage Works and Leeds Building Society, and challenger banks all compete for this business, and a clean SPV case can be quoted across effectively the whole panel. The company being newly incorporated is not a weakness. We arrange these mortgages across the UK, and the process from first call to Decision in Principle typically runs inside a week.
A new company has no money, so the deposit must be put in, and the route matters to underwriters as much as the amount. The standard mechanism is a director's loan: you lend your own funds to the company, documented as such, and the company deploys them as the deposit. The loan sits on the balance sheet as owed to you, repayable tax-free from future profits. Alternatives include subscribing for shares (less flexible to repay) and intercompany loans from a trading business (workable, but it narrows the lender panel and needs structuring care).
Whatever the route, lenders trace provenance: savings statements, the sale of another property, a documented gift. Our guides on the limited company deposit and director's loan deposits cover the detail and the documentation that keeps underwriters comfortable.
For a first company purchase, the realistic sequence runs like this:
The steps that wreck timelines are nearly always 2 and 3, the company and the cash, which is precisely why they sit at the front of the sequence rather than where most first-timers put them, after the property is found.
You have three honest options. Leave them where they are and buy the next property through the company, which costs nothing and migrates the portfolio gradually. Transfer them into the company, which is a market-value sale triggering capital gains tax, the stamp duty surcharge and a full refinance, sometimes softened by Section 162 incorporation relief for genuine property businesses. Or sell, bank the gain, and rebuild inside the company. The transfer is the most heavily marketed and the most frequently mis-sold of the three: read our guide to transferring property without stamp duty for the honest version, including the schemes to walk away from.
For higher-rate taxpayers buying with a mortgage and planning to reinvest profits, usually yes: full interest deductibility and corporation tax at 19 to 25% beat the Section 24 position in personal name. For basic-rate taxpayers, buyers with little borrowing, or landlords who need to spend the rental income each year, the company's extra costs (rate premium, accountancy, dividend tax on extraction) can outweigh the saving. It is a calculation, not a rule: model both routes before committing.
Plan on 25%. Most limited company buy-to-let lenders cap loan-to-value at 75%, with a small number lending to 80% at a higher rate. The deposit normally enters the company as a director's loan, which the company can repay to you tax-free in later years as cash allows. Lenders will want to see where the money originated, so keep the provenance trail clean.
Yes, but it is a sale at market value from you to the company, not a transfer of paperwork. Capital gains tax can arise on your disposal, the company pays stamp duty including the 5% surcharge (8% ADS in Scotland), and the mortgage must be redeemed and rewritten in the company's name. Section 162 incorporation relief can defer the CGT for genuine property businesses. Cost the whole transaction with your accountant before deciding.
Yes, it is a mainstream product. Specialist lenders such as Paragon, Kent Reliance, Fleet Mortgages and Foundation Home Loans underwrite company buy-to-let daily, alongside intermediary-only names like The Mortgage Works and Leeds Building Society. The company borrows in its own name, the directors give personal guarantees, and affordability is tested on the rent at a 125% interest cover ratio. A brand-new SPV is fine; no trading history is required.
We arrange non-regulated limited company buy-to-let mortgages; the tax commentary above is general guidance, not advice. Speak to your accountant about your own position before choosing a structure.
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