Running a buy-to-let portfolio through a limited company has become increasingly popular since the Section 24 mortgage interest restriction reduced the after-tax rental income of higher-rate personal landlords. Inside a limited company, the Section 24 restriction does not apply — the company deducts its full mortgage interest before calculating the taxable profit, which is then subject to corporation tax at 19%–25%. This guide explains how corporation tax works for property companies, what is deductible, and how profits are extracted.
Corporation tax rates for property companies (2026)
| Taxable profit band | Rate | Notes |
|---|---|---|
| Up to £50,000 | 19% (small profits rate) | Applies to each associated company separately |
| £50,001–£250,000 | Tapered 19%–25% | Marginal rate in this band is 26.5% |
| Over £250,000 | 25% (main rate) | Thresholds divided among associated companies |
If you control multiple companies (for example, 3 SPVs), the £50,000 and £250,000 thresholds are divided equally among them — so each SPV's small profits threshold is approximately £16,667. Structure your portfolio companies with a tax adviser before incorporating.
Why mortgage interest is different inside a company
Section 24 of the Finance Act 2015 restricts mortgage interest relief for individual landlords to the basic rate of income tax (20%), regardless of the landlord's actual marginal rate. A 40% taxpayer can therefore only claim 20p of relief on every £1 of interest paid, effectively doubling the after-tax cost of mortgage finance versus the pre-2017 position. Companies are not subject to Section 24 — they deduct the full finance cost as a business expense before arriving at the taxable profit. This is the primary reason higher-rate personal landlords with mortgaged properties choose corporate structures.
Allowable deductions inside a property company
- Mortgage and loan interest: fully deductible (no Section 24 restriction)
- Letting agent and management fees: fully deductible
- Like-for-like repairs: revenue repairs restoring the property to original condition are fully deductible; capital improvements that add value are not
- Insurance: landlord buildings, contents, and rent guarantee insurance
- Professional fees: accountancy, solicitors for tenancy and compliance work
- Director salaries: salaries paid to directors for genuine management are deductible company expenses (and trigger PAYE/NI obligations)
- Capital allowances: qualifying fixtures and fittings may attract Annual Investment Allowance
Extracting profits: salary vs dividends
After paying corporation tax, profits inside the company belong to the shareholders. To access them personally, director-landlords typically combine a salary (up to the National Insurance primary threshold to avoid employee NI, or slightly higher to preserve State Pension credits) with dividends. Salary reduces the company's corporation tax bill; dividends are paid from after-tax profit and attract dividend tax at 8.75%, 33.75%, or 39.35% depending on the recipient's total income. Dividends carry no National Insurance, which is one of their advantages over salary.
Compliance obligations for property companies
- CT600 corporation tax return: filed with HMRC within 12 months of the accounting year-end
- Tax payment: due 9 months and 1 day after the year-end for companies below the quarterly instalment threshold
- Company accounts: filed with Companies House within 9 months of year-end
- PAYE/RTI: required if director salaries are paid; monthly Real Time Information submissions to HMRC
- Annual Confirmation Statement: filed with Companies House each year
- Personal Self-Assessment: directors receiving salary, dividends, or benefits must file annual Self-Assessment returns
This guide is for information only and does not constitute tax or legal advice. The analysis of whether incorporation is beneficial depends on individual circumstances — consult a chartered accountant or tax adviser.