Limited Company vs Personal Name Buy-to-Let

Why the question exists

Personal landlords no longer deduct mortgage interest from rental income. Instead they receive a tax credit at the basic rate, which means a higher or additional rate taxpayer pays tax on rent they never really kept.

Company landlords are unaffected by that change: finance costs remain a fully deductible business expense, and profit is taxed at corporation tax rates rather than your personal rate. That single difference is why the majority of new buy-to-let purchases are now made through a limited company or SPV.

The case for a limited company

Where company ownership tends to work best:

• You are a higher or additional rate taxpayer
• You intend to reinvest rental profit into more property rather than drawing it as income
• You are building a portfolio rather than holding one property
• You want flexibility over when and how profit is extracted
• You are planning for succession, where shares can be passed more easily than property

The case for personal ownership

Personal ownership can still be the better answer when:

• You are a basic rate taxpayer and expect to stay one
• You need the rental income to live on
• You are holding one property with a modest mortgage, or none
• You want the widest choice of lenders and the keenest rates
• You may want to live in the property yourself in future

Cost differences to expect

Limited company buy-to-let rates are generally a little higher than personal rates and arrangement fees are often larger, sometimes charged as a percentage of the loan. Lenders will normally require personal guarantees from the directors, and company accounts add an annual cost.

Set against that, the tax saving for a higher rate taxpayer with meaningful borrowing is usually the larger number. The comparison should be run over your intended holding period, not on rate alone.

Moving property you already own

Transferring a personally owned property into a company is a sale in the eyes of HMRC. That means potential capital gains tax, a further stamp duty charge including the additional property surcharge, and the cost of a new mortgage. Incorporation relief may apply in limited circumstances.

This is firmly accountant territory. We will arrange the finance, but the tax decision should be signed off by a qualified tax adviser before anything moves.