Why UK landlords incorporate in 2025/26
Before Section 24 fully phased in from April 2020, the personal-name BTL was the default UK landlord structure — simpler admin, no Companies House obligations, no corporation tax filings. Mortgage interest was fully deductible against rental income, and you only paid your marginal income tax rate on the net profit.
Section 24 changed that. Mortgage interest is no longer deductible against rental income for personal-name landlords; instead, only a 20% basic-rate credit applies. For higher-rate-taxpayer landlords with material mortgage interest, the effective tax burden rose substantially.
Property held inside a UK limited company is outside the Section 24 regime entirely. Mortgage interest remains a fully deductible business expense against rental income. The corporation tax rate (19-25%) is also generally lower than the higher-rate personal income tax rate (40-45%) on the same profit. The result: for landlords above ~£50k of personal income who are buying new BTL property, the Ltd company route is now usually more tax-efficient.
Tax treatment side-by-side
| Aspect | Personal-name BTL | Ltd company SPV BTL |
|---|---|---|
| Rental income taxed at | Your marginal income tax rate (20/40/45%) | Corporation tax (19% to £50k profit, 26.5% effective £50k-£250k, 25% above £250k) |
| Mortgage interest treatment | Not deductible — 20% basic-rate credit only | Fully deductible business expense |
| Allowable expenses | Letting fees, repairs, insurance, accountant — yes | Same plus directors' salary (where reasonable) and pension contributions |
| CGT on sale | Personal CGT rates (18-24% for residential, post Oct 2024) | Corporation tax on the gain (no separate CGT regime; rolled into corporation tax) |
| Loss relief | Property losses carry forward against future rental income | Trading losses can be set against other company income; group relief possible |
| To take cash out personally | Already yours | Dividend tax (8.75/33.75/39.35%) or salary (PAYE) |
| Inheritance / succession | Personal estate — IHT applies | Share-based — easier to gift over time, BPR may apply in some cases |
| Mortgage rate | Standard BTL rates | ~0.3-0.8% premium vs personal BTL |
| Annual admin | Self-Assessment only | Annual accounts + corporation tax + confirmation statement |
Getting profit out of the SPV
Profit retained in a Ltd company SPV only attracts corporation tax (19-25%). To extract that profit personally, you have four options:
- Dividends. Most common. Pay corporation tax on profit first, then take dividends. Dividend tax applies personally: £500 allowance free, then 8.75% basic / 33.75% higher / 39.35% additional rate.
- Director salary. Tax-deductible against corporation tax. Triggers PAYE income tax + employee NI + employer NI. Usually only used at the personal allowance level (£12,570/year) to preserve NI record without triggering higher tax.
- Director pension contributions. Company-paid contributions to the director's pension are fully deductible against corporation tax and don't trigger personal tax until withdrawal. Often the most tax-efficient long-term extraction for higher-rate taxpayers.
- Retain in the company. Don't extract — leave the profit in the SPV to fund deposits on additional properties, refurbishment, or future tax-year extraction when you might be in a lower personal band.
For landlords building a portfolio, retaining profit in the SPV is usually the right answer. Extraction comes later, often phased across multiple tax years to stay in the basic-rate dividend band.
The mortgage rate premium — is it worth it?
SPV BTL mortgages typically run 0.3-0.8% higher than equivalent personal-name BTL rates from the same lender — see SPV mortgages on Limited Company Mortgage for current rates.
For a £200,000 mortgage at 5.5% personal vs 6.0% SPV, that's £1,000/year of extra interest. For most higher-rate-taxpayer landlords, the tax saving on full corporation-tax-deductible interest more than offsets the rate premium:
- Personal-name route: £12,000 mortgage interest, no deduction, only 20% credit = effective £2,400 relief
- Ltd company route: £12,000 mortgage interest, fully deductible at 19-25% corporation tax = effective £2,280-£3,000 relief, PLUS the principal is paid down from pre-CT profit (more cash flow available)
Even with the rate premium, the higher-rate-taxpayer landlord usually nets out ahead via Ltd. The break-even depends on personal tax band, LTV, and rental yield — most multi-property landlords above ~£50k personal income end up in SPV structures despite the higher mortgage rate.
Transfer costs if you incorporate existing properties
Transferring existing personal-name BTL property into a Ltd company is treated, for tax purposes, as a sale from yourself to the company at market value. Two taxes trigger:
- CGT on disposal. 24% on the residential property gain for higher-rate taxpayers (post-October 2024; was 28%). 18% for basic-rate. £3,000 annual exempt amount.
- SDLT on acquisition. Standard residential SDLT bands plus 5% additional-property surcharge. For a £250k property: ~£15,000 SDLT.
For an established portfolio with significant capital gains, the combined cost of incorporation can be 25-35% of portfolio value. Whether that's worth paying depends on the holding period ahead.
Section 162 Incorporation Relief can defer the CGT if the property activity qualifies as a "business" (typically 20+ hours/week active management on a portfolio of 5+ properties). The SDLT generally cannot be deferred. See Section 162 explained.
For most established personal-name landlords, the standard advice is: leave existing properties personal, buy future properties via SPV.
How to set up an SPV correctly
- Choose a clean name. Companies House requires unique names. Common patterns: "[Surname] Property Holdings Ltd", "[Location] Investments Ltd".
- Set up directors and shareholders. Usually you alone or you + spouse. Co-investors complicate mortgage applications.
- Use the right SIC code. Property investment SICs are 68209 (most common, "Other letting and operating of own or leased real estate") or 68100 ("Buying and selling of own real estate"). Trading codes get rejected by BTL lenders.
- Incorporate at Companies House. £50 online, typically 24 hours.
- Open a business bank account. Tide, Mettle, Starling Business all do free SPV accounts. Some lenders require specific institutions — check before opening.
- Engage a landlord-specialist accountant. Annual accounts, CT600 corporation tax return, confirmation statement, monthly bookkeeping. Typical fee: £22-£200/month per SPV — GoLandlord matches you with one.
Total setup: ~£300-£500 all-in. Ongoing: the accountant fee plus £13/year confirmation statement plus any director payroll if relevant.