The short answer
A limited company can cut the tax on rental profits, especially for higher-rate taxpayers with mortgages. But moving properties you already own into a company can trigger large tax bills, and the benefit shrinks if you need to draw all the income out. It's a decision to make with your own figures, not a rule of thumb.
Why more landlords are asking
- Mortgage interest relief is restricted. Individual landlords can't deduct mortgage interest from rental profits. Instead they get a tax credit at the basic rate: 20% now and 22% from April 2027. Higher-rate taxpayers lose relief on the rest.
- Property income tax is rising. From 6 April 2027, rental profits for individuals are taxed at 22%, 42% or 47%, two percentage points above the rates on wages.
- Companies are treated differently. A company deducts mortgage interest in full and pays Corporation Tax at 19% to 25% on the profit that's left.
The catch: getting money out
Profits belong to the company, not to you. To spend them personally, you usually take dividends, which are taxed again: at 10.75% for basic-rate taxpayers and 35.75% for higher-rate taxpayers since April 2026, after a £500 dividend allowance. A company works best when you can leave profits inside it to pay down debt or buy more property.
A worked example
A landlord receives £20,000 of rent a year, pays £8,000 of mortgage interest and £2,000 of other costs. Their other income already makes them a higher-rate taxpayer. Using the rates from April 2027, and ignoring the £500 dividend allowance:
- Owned personally: tax at 42% on £18,000 (the profit before interest) is £7,560, less a £1,760 credit for the interest, so £5,800 of tax. They keep £4,200.
- Owned by a company: Corporation Tax at 19% on the £10,000 profit is £1,900, leaving £8,100 in the company. Paid out in full as a dividend, about £2,896 of dividend tax leaves them £5,204.
These are simplified figures. They leave out the extra costs of running a company, such as annual accounts, a Corporation Tax return and Companies House filings, any difference in mortgage rates, and the annual ATED returns needed for homes worth over £500,000.
Moving properties you already own
Transferring a property to your own company is treated as selling it at its market value. That can mean:
- Capital Gains Tax for you, at 18% or 24% on any increase in value since you bought it
- Stamp Duty Land Tax for the company, on the full market value and usually including the 5% surcharge for additional properties
- new mortgages in the company's name, often at higher rates, plus arrangement and legal fees
Landlords whose lettings amount to a genuine business may be able to defer the Capital Gains Tax with incorporation relief, but HMRC looks closely at these claims. Many landlords keep their existing properties personally and buy new ones through a company instead.
Who a company tends to suit
- higher and additional-rate taxpayers
- landlords with significant mortgages
- landlords buying new properties, rather than transferring existing ones
- landlords who plan to reinvest profits and grow their portfolio
Who it often doesn't suit
- basic-rate taxpayers who live on their rental income
- landlords with small mortgages or none
- anyone planning to sell within a few years
- owners of properties with large gains built up, where transfer costs would be high
Budgets can change the picture
These figures reflect the rules in the Finance Act 2026. Tax rates and reliefs can change at any Budget, so any decision should be checked against the rules at the time you make it.