Over 66,000 landlords set up a limited company for their buy to let in 2025 according to Companies House. That is more than ever before. These are not all big portfolio investors either. A lot of them are usual people who sat down with an accountant, saw what they were losing in tax, and decided enough was enough.
I did the same. I run my businesses through limited companies anyway, so when I started taking property seriously it felt like a natural move. But even if you have never touched a limited company before, the case for using one for buy to let is pretty hard to argue with once you understand how the tax works.
The Tax Change That Started All of This
Before 2017, if you owned a rental property personally you could deduct your full mortgage interest from your rental income before working out your tax bill. That was the rule for years and it made buy to let work well even for people paying higher rate tax.
Then Section 24 came in. According to HMRC, personal landlords now only get a flat 20% tax credit on mortgage interest regardless of what rate of income tax they actually pay. If you are on 40% tax, you are now being taxed on money that went to your mortgage lender before you ever saw it. It is genuinely brutal if you run the numbers.
Limited companies are not touched by Section 24 at all. Mortgage interest is just a business expense. It comes off the profit before any tax is calculated. That is the whole game right there.
What the Difference Actually Looks Like in Real Money
Forget the theory for a second. Say your property rents for £1,200 a month, so £14,400 a year. Your mortgage interest is £500 a month, so £6,000 a year. Profit before other expenses is £8,400.
As a personal landlord on 40% tax, HMRC calculates your tax on the full £14,400 rental income. That is £5,760. You then get a 20% credit back on the £6,000 interest which is £1,200. So your actual tax bill is £4,560.
Same property in a limited company. The £6,000 mortgage interest comes off first. Corporation tax is 19% on the £8,400 profit according to HMRC, which is £1,596.
Same house. Same rent. Same mortgage. You are paying £1,596 instead of £4,560. That is nearly £3,000 a year you keep. On one property.
What Happens When You Leave the Money in the Company
This is the bit that really adds up over time. You only pay personal tax when you take money out of the company as a salary or dividend. If you leave the profit sitting in there and use it to save for your next deposit, pay for maintenance or just let it build, it only gets taxed at the corporation tax rate. You are not triggering a personal tax bill on money you are not spending. That is how you actually build a portfolio rather than just owning one property forever.
The Other Stuff Worth Knowing
Your Personal Finances Stay Separate
A limited company is its own legal thing. If a tenant takes you to court or something goes seriously wrong, the claim is against the company, not you. Your personal savings, your house, whatever else you own is not automatically at risk. For anyone who runs other businesses as well, keeping the property ring fenced from everything else just makes sense.
Passing the Portfolio On
Transferring shares in a company is a lot less painful than transferring property titles one by one. According to HMRC, property in your personal name gets dragged into your estate for inheritance tax purposes at 40% above the threshold. A company structure gives you more options around that. It is not a magic fix but it gives you tools that personal ownership does not.
Be Honest About the Downsides
Limited company mortgages used to cost noticeably more than personal buy to let products. The gap has closed a lot and according to Foundation Home Loans plenty of limited company deals are now below 5%, but you still need to check the full cost including arrangement fees rather than just the headline rate.
You will also need an accountant who knows what they are doing with property companies. Budget somewhere around £800 to £1,500 a year for that. It is not optional if you want to stay on the right side of HMRC and actually understand your numbers.
If you are a basic rate taxpayer and you need to pull all the rental profit out every month to cover your living costs, the advantage shrinks. Corporation tax going in, dividend tax coming out, it eats into the saving. This structure rewards people who are building over the long term, not people who need the cash right now.
And if you already own a rental property personally and are thinking about moving it into a company, be very careful. HMRC treats that as a sale. You could face stamp duty at the higher additional property rates plus capital gains tax on any increase in value. For most people that makes the transfer not worth it. The company structure works best when you buy new through it from day one.
FAQ
Can I put my existing buy to let into a limited company?
You can but it will probably cost you more than it saves in the short term. HMRC treats the transfer as a sale so stamp duty and potentially capital gains tax both apply. Most people in this situation are better off leaving the existing property as it is and buying anything new through the company going forward.
Are limited company buy to let mortgages harder to get?
There are fewer products than for personal mortgages but the market has grown a lot. According to Foundation Home Loans rates are now competitive and many sit below 5%. You will need a broker who deals with limited company buy to let regularly rather than just a standard high street adviser.
Does it make sense for just one property?
If you are a higher rate taxpayer, quite possibly yes even from property one. If you are a basic rate taxpayer who plans to spend the rental income every month, probably not once you factor in the accountancy costs. Get someone to run your actual numbers rather than making a decision based on general advice.
Section 24 broke the maths for a lot of personal landlords. A limited company fixes it. It is not complicated, it is not a loophole, it is just using the right structure so you are not voluntarily handing over more tax than you owe.
If you are buying property to actually build wealth rather than just cover a mortgage and hope for capital growth, sort the structure before you buy. Trying to fix it afterwards is expensive and painful.
Talk to a property tax specialist. Not a generalist accountant, someone who specifically deals with property investors. The cost of that conversation is nothing compared to what getting it wrong will cost you over ten years.
Icebug Wealth does not provide regulated financial advice. Everything here is based on personal experience and research. Always do your own due diligence before making any financial decisions.