Landlord Tax & Structure

Buy-to-Let Limited Company UK � SPV Incorporation, Section 24, Corporation Tax, and Mortgage Availability

Covers why landlords use limited companies post-s.24 (ITTOIA 2005 ss.272A-272B; full mortgage interest deductibility; corporation tax 19-25%); SPV setup (SIC code 68100/68209; 3% SDLT surcharge; Companies House obligations; personal guarantees); tax on extraction (dividend tax 8.75%/33.75%/39.35%; salary vs dividend optimisation); incorporation of existing properties (CGT at market value; SDLT surcharge; s.162 TCGA 1992 unavailable for passive BTL; practical strategy); and IHT and mortgage availability.

17 min readUpdated 8 June 2026Last reviewed: 17 May 2026buy-to-let-limited-companyspvsection-24corporation-tax

Section 24 and the Corporation Tax Advantage

The Section 24 mortgage interest restriction (ITTOIA 2005 ss.272A-272B; fully effective from 2020-21) replaced full interest deductibility for individual landlords with a 20% basic rate tax credit. For higher rate (40%) and additional rate (45%) taxpayers with significant leverage, this dramatically increases the effective tax rate on rental income � on some leveraged portfolios it creates a tax liability on properties running at an economic loss. A limited company is not subject to s.24: it deducts mortgage interest in full as a business expense before calculating corporation tax (19% on profits below �50,000; 25% above �250,000; marginal relief between thresholds). Retained profits compound at the lower corporation tax rate � the company acts as a tax deferral wrapper. Extraction: dividends face tax at 8.75% (basic), 33.75% (higher), or 39.35% (additional rate) � plus the underlying corporation tax, the total extraction cost can exceed the individual rate for modest portfolios. The company route primarily benefits higher and additional rate taxpayers with significant mortgage leverage.

SPV Setup, SDLT, and Incorporation of Existing Properties

SPV setup: use SIC code 68100 (buying/selling own real estate) or 68209 (letting own/leased real estate) � lenders and HMRC check the SIC code. File confirmation statements, annual accounts (at Companies House within 9 months), and CT600 (at HMRC within 12 months) annually; pay corporation tax within 9 months + 1 day. The 3% SDLT surcharge applies to all residential purchases by a company � no main residence exception; model this cost in the acquisition budget. Personal guarantees: all limited company BTL lenders require personal guarantees from directors/shareholders; the company structure does not protect personal assets from mortgage default. Incorporation of existing properties: transfer to a connected company triggers CGT at market value (18%/24% on the accrued gain) and full SDLT plus the 3% surcharge. Section 162 TCGA 1992 (incorporation relief) is generally not available for passive residential letting portfolios � HMRC does not accept them as a qualifying 'business'. Practical strategy: hold existing properties personally; buy all future acquisitions through the SPV to avoid triggering CGT and SDLT. Company mortgages: most major BTL lenders offer company products; rates are typically 0.3-1.0% higher than individual BTL; 75% LTV typical.

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Hand-picked by topic overlap with this guide.

UK-Wide � Trading Property: Disposal Profit = Income Tax (Individuals) or Corporation Tax (Companies); No PPR; No Lettings Relief; NIC May Apply � Investment Property: Disposal Gain = CGT (18%/24% from 6 April 2024); PPR and Lettings Relief Available; 60-Day Report Required � Badges of Trade (HMRC): Subject Matter; Frequency; Length of Ownership; Supplementary Work; Motive; Financing; Circle of Trade � Developer Trap: Serial Buy-Improve-Sell = Trading Even If Initial Intention Was Investment � IHT BPR (s.104 IHTA 1984): Trading Property Business = 100% BPR; Investment Business FAILS s.105(3)

Property Trading vs Investment UK 2026 � Badges of Trade, HMRC Classification, Income Tax vs CGT and IHT Business Property Relief

Whether property is held as a trading asset or a capital investment determines tax treatment entirely. Trading property (stock-in-trade of a property dealing or developing business): profits on disposal = income tax (individuals � ITTOIA 2005) or corporation tax (companies � CTA 2009) at full marginal rates; no principal private residence relief (TCGA 1992 s.222); no lettings relief (s.223); no annual CGT exempt amount; NIC may apply on self-employed trading profits; trading losses can offset other income (ITA 2007 s.64). Investment property: disposal gains = CGT (18% basic rate / 24% higher rate for residential from 6 April 2024); PPR and lettings relief available; 60-day CGT report and payment on account required. HMRC uses badges of trade to classify: subject matter; frequency of similar transactions; length of ownership; supplementary work carried out; motive at purchase; financing used; circle of trade. No single badge is conclusive. The developer trap: serial buy-improve-sell activity may be classified as trading even if initial intention was investment � intention is relevant but not determinative (HMRC v Smallwood [2010] UKUT 82). IHT Business Property Relief (BPR): genuine trading property business qualifies for 100% BPR (IHTA 1984 s.104); property investment business (wholly or mainly holding investments � s.105(3)) does NOT qualify. UK-wide application (income tax and CGT are reserved matters); LBTT (Scotland); LTT (Wales) on acquisitions.

HMLR Title Classes � LRA 2002

Possessory Title UK � HMLR Title Classes, How Possessory Title Arises, BTL Mortgage Restrictions, Title Indemnity Insurance and Converting to Absolute Title

Possessory title is one of four classes of registered title at HM Land Registry and the one that most commonly causes BTL mortgage financing problems. Unlike absolute title (which carries a full HMLR state guarantee), possessory title is registered subject to any estates or rights that existed at the date of first registration � meaning a third party with a pre-registration interest can potentially make a successful claim. Most mainstream BTL lenders (Nationwide; Barclays; NatWest; Halifax; Paragon; Aldermore) will not lend on possessory title without title indemnity insurance. Key points: (1) how possessory title arises: adverse possession registration (LRA 2002 Sch 6); lost or destroyed title deeds on first registration; informal inheritance without probate; (2) impact on lending: most mainstream BTL lenders require absolute title; specialist lenders (Shawbrook; Together; Hampshire Trust Bank) may lend with a satisfactory title indemnity insurance policy; (3) title indemnity insurance: one-off premium (typically 0.1-0.5% of property value); covers market value loss + lender charge + legal costs; lender typically included as co-insured; (4) conversion to absolute title (LRA 2002 s.62): after 12 years of quiet possession from the date of HMLR registration of possessory title, the registered proprietor can apply to HMLR to upgrade to absolute title � HMLR notifies interested parties and upgrades to absolute if no valid objection received.

Property Tax

Property Investment Company UK

Setting up a limited company SPV for buy-to-let � corporation tax rates, Section 24 mortgage interest benefit, SDLT and CGT transfer costs, dividend extraction, ATED, and when the company structure is and is not beneficial.

England � Rental Losses � Ring-Fence � HMRC � Section 24

Landlord Rental Losses: Carry Forward Rules and Section 24 Interaction