There is no single right answer to whether rental property should sit in a limited company or in your own name: it depends on your tax rate, whether you are buying new or transferring an existing property, and how you plan to use the income. Higher-rate landlords are often drawn to companies because of Section 24, which restricts mortgage interest relief on personally-held property to a basic-rate credit. But a company brings its own costs, including Corporation Tax, dividend tax on money you take out, and, for existing properties, a potential Capital Gains Tax and Stamp Duty Land Tax charge just to make the move.
What is Section 24, and why does it push landlords towards companies?
Section 24 restricts the tax relief a landlord gets for mortgage interest and other finance costs on residential property held personally. Instead of deducting finance costs from rental profit before tax, as most other business expenses are deducted, you get a flat 20% tax credit against your finance costs. For a higher-rate taxpayer paying 40% tax, this means the effective relief on interest costs is capped well below the rate of tax paid on the rest of the profit.
For 2026/27, the credit remains 20%. It rises to 22% only from 6 April 2027, alongside new property income tax rates. This is confirmed in HMRC's guidance on the changes to tax relief for residential landlords. Section 24 does not apply to properties held through a limited company, because a company deducts interest as a normal business expense before calculating its taxable profit.
From 6 April 2027, property income tax rates for individuals also change: the basic, higher and additional rates for property income rise to 22%, 42% and 47% respectively, alongside the Section 24 credit increase. For 2026/27, property income is still taxed at the ordinary Income Tax rates of 20%, 40% and 45%.
How does the tax actually compare, personal versus company?
The two routes are taxed completely differently, which is why a straight rate comparison is not enough on its own.
Corporation Tax rates and thresholds are confirmed on gov.uk's Corporation Tax rates page; dividend rates and the allowance on gov.uk's tax on dividends page. The key point a personal-versus-company comparison must not skip: money left inside the company, not paid out as dividends, is only taxed once, at Corporation Tax rates. It is only when you extract profit personally that the second layer of dividend tax applies.
Worked example: one year, both ways
Example. A higher-rate taxpayer landlord receives £24,000 rent in the year, with £12,000 of mortgage interest and £3,000 of other allowable expenses (letting agent fees, repairs, insurance).
Held personally. Rental profit before finance costs: £24,000 minus £3,000 other expenses = £21,000. Under Section 24, the £12,000 mortgage interest is not deducted from this profit; instead, the full £21,000 is taxed at the landlord's 40% higher rate: £21,000 × 40% = £8,400. A tax credit is then given at 20% of the £12,000 finance cost: £12,000 × 20% = £2,400. Net Income Tax due: £8,400 minus £2,400 = £6,000.
Note that the £21,000 of profit before the credit is only reduced by the £2,400 credit, not by the full £12,000 of interest; this is the mechanism that makes Section 24 more expensive for higher-rate taxpayers than a normal expense deduction would be.
Held through a company. The company deducts the mortgage interest in full as a business expense before calculating taxable profit: £24,000 minus £12,000 interest minus £3,000 other expenses = £9,000 taxable profit. At the small profits rate of 19% (profit is under the £50,000 lower limit for marginal relief), Corporation Tax due: £9,000 × 19% = £1,710.
If the landlord then wants to take that profit out of the company as a dividend, a further layer of tax applies. After Corporation Tax, £9,000 minus £1,710 = £7,290 is available to distribute. Above the £500 dividend allowance, and assuming the landlord is already a higher-rate taxpayer from other income, the dividend is taxed at 35.75%: (£7,290 minus £500) × 35.75% = £2,428.83. Total tax if the profit is fully extracted as a dividend in the same year: £1,710 plus £2,428.83 = £4,138.83.
In this example, the company route costs less in tax even after extracting the profit as a dividend in the same year (£4,138.83 against £6,000 personally). Leaving the profit inside the company instead of extracting it immediately reduces the tax further, to just the £1,710 of Corporation Tax, but then the money is not in the landlord's own hands to spend.
What does it cost to move an existing property into a company?
This worked example assumes new borrowing or a new purchase. Moving an existing, personally-held property into a company is a different transaction entirely, and it is not simply a paperwork exercise.
Transferring a property you already own into a company you also own is treated, for tax purposes, as a sale at market value, even though no money may actually change hands between you and the company. This can trigger a Capital Gains Tax charge on any gain since you bought the property, calculated in the normal way.
The company, as the new owner, will usually also need to pay Stamp Duty Land Tax on the transfer, at market value, including the additional-property surcharge of 5 percentage points on top of the standard residential rates, confirmed on gov.uk's SDLT on additional residential properties page. Between the CGT on the way in and the SDLT the company pays to acquire it, incorporating an existing portfolio can carry a substantial upfront cost that has to be weighed against the ongoing tax saving.
There is a relief, incorporation relief, that can defer some of the Capital Gains Tax charge where a property business is transferred to a company in exchange for shares. The conditions for this relief are strict: broadly, HMRC needs to be satisfied that what you are running amounts to a genuine business, not simply the passive ownership of one or two let properties, and that the whole business, not just selected assets, transfers in exchange for shares. Whether a particular portfolio qualifies is a question of fact and degree, not a fixed number of properties, and needs testing against your own circumstances rather than assumed.
Compliant planning versus schemes under HMRC challenge
It is worth being direct about this. Restructuring genuine lettings activity into a company, done properly, with the right relief conditions met and the right professional advice, is legitimate tax planning. HMRC does not object to landlords incorporating where the underlying business and the relief conditions are actually met.
What HMRC does challenge, and has successfully challenged, are marketed incorporation and "hybrid" structures sold on the promise of avoiding Section 24 or CGT and SDLT on transfer without a real change in how the business operates or who really controls the assets. If a structure is being sold to you as a way of keeping all the benefits of personal ownership while avoiding the tax that comes with it, that is a different proposition from proper incorporation, and it carries a real risk of HMRC enquiry, additional tax, and penalties.
What this means in practice
If you are buying a new property and expect to be a higher-rate taxpayer, working out the personal-versus-company comparison before you buy, using your own numbers, is worth doing early, because the structure is far simpler to set up correctly from the outset than to unwind or change later.
If you already hold property personally and are considering moving it into a company, get the Capital Gains Tax and Stamp Duty Land Tax costs calculated properly first, and have someone check whether incorporation relief could realistically apply to your situation, before assuming the ongoing tax saving justifies the upfront cost.
Mortgage availability and cost can also differ between personal and company borrowing, and that is a lender conversation as much as a tax one; it belongs in the same decision, not a separate one.
Frequently Asked Questions
Not always. It depends on whether you need the rental income personally now, whether you are transferring an existing property (which can trigger Capital Gains Tax and Stamp Duty Land Tax) or buying new, and how mortgage costs compare between personal and company borrowing.
No. A company deducts mortgage interest and other finance costs in full as a business expense before calculating its taxable profit; Section 24's restriction to a 20% credit only applies to property held personally.
Potentially two separate charges: Capital Gains Tax on any gain you have made since buying the property, because the transfer is treated as a sale at market value, and Stamp Duty Land Tax paid by the company to acquire it, including the additional-property surcharge.
Sometimes, but the conditions are strict. HMRC needs to be satisfied you are transferring a genuine business, not simply passive property ownership, and that the whole business transfers in exchange for shares. Whether your portfolio qualifies needs checking against your own facts.
Done properly, with the relief conditions actually met, incorporation is legitimate planning. HMRC has challenged marketed schemes that claim to avoid Section 24 or transfer taxes without a real change in how the business operates; the difference is in the substance of the structure, not the label.
Run your numbers with us
Whether personal ownership or a company structure suits your portfolio depends on figures specific to you: your tax band, your borrowing costs, whether you are buying or transferring, and what you actually need the income for. We can work through your own numbers both ways before you decide. Call us on 020 8554 2135 or email info@visionconsulting.co.uk and a senior manager will take your enquiry personally. You can also reach us via our contact page.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances.