Guide · 11 min read
Every tax a property company touches: corporation tax at 19 to 25%, full interest deductibility, dividend extraction, CGT on the way in, SDLT surcharges and ATED.
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.
Limited company buy-to-let tax is the set of taxes a property company pays across the ownership cycle: stamp duty when it buys, corporation tax on its rental profit while it holds, corporation tax again on the gain when it sells, and a personal layer of dividend or income tax when the shareholders take money out. Understanding all four stages, not just the headline corporation tax rate, is what makes the company-versus-personal decision rational rather than fashionable.
We are mortgage brokers, not accountants, but every limited company buy-to-let mortgage we arrange sits on top of this tax logic, and the structure has to be right before the lending is. What follows is the full map, stage by stage, with worked numbers. Treat it as general guidance and confirm the specifics with your accountant before acting.
Across the life of one property, a company landlord meets up to five taxes:
| Stage | Tax | Headline position |
|---|---|---|
| Purchase | Stamp duty (SDLT/LBTT/LTT) | Standard bands plus the additional-dwelling surcharge on every company purchase |
| Holding | Corporation tax on rental profit | 19% to 25%, mortgage interest fully deductible |
| Extraction | Dividend tax / income tax / NI | 8.75% to 39.35% on dividends; nil on director's loan repayments |
| Sale | Corporation tax on the chargeable gain | Gain taxed at the company's corporation tax rate |
| Death / succession | Inheritance tax on the shares | Shares form part of the estate; planning options differ from direct ownership |
Two taxes the company does not normally pay are worth flagging. There is no National Insurance on rental profit, in either structure, because rent is not earnings. And residential rent is exempt from VAT, so a standard SPV never registers. The annual tax on enveloped dwellings (ATED) catches companies holding residential property worth over £500,000, but genuine lettings businesses claim relief through an annual return; your accountant files it, and it costs nothing but admin for a normal rental.
The company pays corporation tax on its property profit: rent received minus deductible expenses. The rates, set by HMRC for financial year 2026:
Most one-to-three-property companies sit comfortably inside the 19% band. The thresholds are divided by the number of associated companies under common control, so a landlord running five separate SPVs has a £10,000 small-profits threshold in each. That single rule changes the old "one property per company" habit; consolidating into one company, or a group, is often cleaner. It is also one of the inputs we weigh when structuring limited company portfolio mortgages, because lenders price multi-property companies differently too.
Deductible costs follow normal business rules: letting agent fees, repairs and maintenance (not improvements), insurance, ground rent and service charges, accountancy, and, the big one, finance costs in full. Mortgage interest, lender arrangement fees and broker fees are all deductible against rental income before corporation tax is calculated.
Section 24 is the reason this guide exists. Since April 2020, individual landlords cannot deduct mortgage interest from rental income at all; they receive instead a tax credit worth 20% of the interest, regardless of their own tax band. A company is untouched by the rule and deducts every pound of interest as an ordinary business expense.
The asymmetry is brutal at higher leverage. Take £15,000 of rent, £3,000 of running costs and £9,000 of mortgage interest:
| Higher-rate individual | Limited company | |
|---|---|---|
| Taxable profit | £12,000 (interest not deductible) | £3,000 (interest deducted) |
| Tax | £4,800 at 40%, less £1,800 credit = £3,000 | £570 at 19% |
| Cash left after mortgage and tax | £0 | £2,430 (pre-extraction) |
The individual keeps nothing; the company keeps £2,430 before any extraction decision. A higher-rate landlord can even pay tax on a loss-making property personally, because the taxable figure ignores the interest actually paid. The mechanics, the phase-in history and who exactly is caught are covered in our guide to Section 24 explained; the corporation tax detail continues in corporation tax on rental income.
The fair counterweight: a basic-rate taxpayer with modest leverage gets most of the interest relief back through the 20% credit anyway, and for them the company's extra running costs and extraction layer can make personal ownership the better net position. Section 24 made companies compelling for the leveraged higher-rate landlord, not for everyone.
Corporation tax is only the first layer. The second layer depends entirely on how money leaves the company, and this is where good planning earns its keep.
Money you lent into the company, typically the deposit, comes back to you tax-free, because the company is repaying a debt, not distributing profit. A director who put £70,000 in can draw £70,000 of accumulated post-tax profit out with no second tax layer at all. The mechanics are in our guide to director's loan deposits; the planning point is to document the loan from day one so the repayment right is unambiguous.
After the £500 dividend allowance: 8.75% basic rate, 33.75% higher rate, 39.35% additional rate, on top of the corporation tax already paid. The combined burden for a higher-rate taxpayer extracting everything (19% corporation tax, then 33.75% on the remainder) lands around 46%, which is why "extract everything every year" is the worst way to run a property company. Dividends work best filling unused basic-rate band, a spouse shareholder's allowance, or low-income years.
A small salary is deductible for the company but attracts income tax and National Insurance personally; it suits some directors and not others. Employer pension contributions are deductible for the company and land in the pension untaxed, often the most efficient extraction of all for landlords who do not need the cash now. Both are squarely accountant territory: take advice before setting either up.
Because a company's dividends follow its share register, shareholding design is itself a tax tool. A spouse with unused basic-rate band receiving dividends at 8.75% instead of 33.75% changes the extraction arithmetic materially, and different share classes (the so-called alphabet shares) allow dividends to be tilted year by year as circumstances move. Adult children can hold growth shares so that future value accrues outside the parents' estate. All of this must be set up properly, with genuine ownership rather than paper arrangements, and it interacts with settlements legislation that catches artificial income-shifting, so it is firmly your accountant's drawing board rather than a template exercise. The point for this guide is simpler: personal ownership offers nothing comparable without conveyancing, stamp duty and CGT on every adjustment, while a company re-papers the income split with a share transfer.
The company is not obliged to distribute anything. Profit retained at the 19% rate compounds inside the company as the deposit for the next purchase, which is precisely how portfolio builders use the structure. Personal ownership offers no equivalent: the rent is taxed at your marginal rate the year it arises whether you spend it or not.
A company pays the additional-dwelling surcharge on every residential purchase, there is no "first property" exemption as there can be for individuals, so company buy-to-let stamp duty runs at the standard bands plus the surcharge from the first pound. On a £220,000 English purchase that is roughly £13,100 of SDLT. Scotland (LBTT with the Additional Dwelling Supplement) and Wales (LTT higher rates) run parallel regimes at different percentages.
Plan it as a cost of acquisition rather than an afterthought, because it is deposit-sized money: the surcharge element alone is 5% of the entire price in England, before the standard bands stack on top. Two softeners exist at the margins. Stamp duty, like other capital costs of purchase, is added to the property's base cost and relieved against the eventual gain when the company sells. And purchases of six or more dwellings in one transaction can be charged at non-residential rates, which occasionally rescues a portfolio acquisition. Neither changes the headline: the company pays more tax at the door than a first-time personal investor would, and the structure has to earn that back through the holding years.
Stamp duty also dominates the economics of moving an existing personal portfolio into a company, because the company "buys" the properties at market value. That transaction, with its capital gains tax leg and the potential reliefs, is a topic of its own: see our transfer property to a limited company service page and the guide to incorporation relief.
When the company sells, the gain (sale price minus purchase price minus capital costs) is simply added to its profits and taxed at corporation tax rates, 19% to 25%. Compare the personal position: residential capital gains tax at 18% or 24% with a £3,000 annual exempt amount. At the small profits rate the company edges it; at the main rate the individual can. The bigger structural difference is that a company's sale proceeds still sit inside the company, with the extraction layer to come, while an individual's are immediately personal. Sellers planning to reinvest favour the company; sellers planning to spend favour personal ownership.
A company also offers a second way to sell: the shareholders can sell the company itself rather than the property. The buyer acquires the shares, the property never changes hands, and the buyer's stamp duty bill falls dramatically (0.5% stamp duty on shares versus full SDLT on bricks). Share sales suit clean single-asset SPVs and are one reason buyers pay a small premium for them. The seller's side of a share sale is taxed as a personal capital gain on the shares rather than a company gain on the property, which can collapse the two tax layers into one; against that, the buyer inherits the company's low base cost in the property and its filing history, so the price negotiation usually shares the saving. It only works when the company is genuinely clean, one property, one mortgage, documented director's loans, no surprises in the books, which is yet another argument for running the SPV tidily from the start.
On death, company shares pass through the estate like any asset. Property investment companies do not generally qualify for business property relief, so the inheritance tax saving some promoters imply is usually overstated; what the structure genuinely offers is flexibility, multiple share classes, gradual gifting of shares, growth shares for children, that direct property ownership cannot replicate without conveyancing and stamp duty each time. Succession structuring is specialist advice territory; raise it with your accountant early rather than after the portfolio is built.
The structure has a fan club it does not always deserve. The company is usually the wrong answer when:
Against that, the company earns its keep for the higher-rate, leveraged, reinvesting landlord, which is most of the people building portfolios in 2026. There is also a mortgage-side trade to weigh, and it cuts both ways. Company products price 0.20% to 0.40% above personal-name equivalents, roughly £330 to £660 a year on a £165,000 loan, which is real money against a thin-margin property. But the company's stress test is gentler: lenders assess company cases at a 125% interest coverage ratio where higher-rate individuals face 145%, so the same rent supports roughly 16% more borrowing through the company. For a landlord whose constraint is leverage rather than rate, the company is the cheaper structure in the way that actually binds. We quote both structures side by side on every limited company buy-to-let mortgage enquiry so the comparison is visible, and the limited company vs personal calculator runs your own rent, mortgage and tax band through both regimes in a couple of minutes.
Pulling the stages together: a higher-rate taxpayer's SPV buys a £220,000 property with a £165,000 interest-only mortgage at 5.5%, rents it at £1,100 per month, holds for ten years, and sells at £290,000.
The same investor in personal name pays tax on £10,600 of "profit" every year (the interest being non-deductible), keeps roughly £1,300 annually after the credit, and pays 24% CGT on the gain. The decade-long gap runs well into five figures, and that is before the reinvestment compounding. It is also before your personal circumstances, which can change the answer entirely: the calculator first, your accountant second, then the mortgage.
Enquiry
Initial consultations are always fee-free. Same-business-day callback from a former Bank of Scotland and Lloyds Banking Group banker, not a chatbot or a paid lead form.