Running a buy-to-let portfolio through a limited company has become increasingly common since Section 24 restricted mortgage interest relief for higher-rate individual landlords to the basic rate of 20%. Limited companies are not subject to Section 24 — they can deduct the full mortgage interest cost before calculating the profit on which corporation tax is charged.
Whether a company structure actually saves tax depends on the individual landlord's circumstances: total income, plans for the rental profits, the number of properties, existing debt, and long-term exit strategy. This page explains how corporation tax works for property companies, what expenses are deductible, and the key compliance obligations. It is a guide to the tax mechanics — not personal tax advice, which should come from a chartered accountant or tax adviser with knowledge of your full situation.
Corporation tax rates for property companies (2026)
The rate a property company pays depends on its total taxable profits in the accounting period:
- Small profits rate (19%): applies to taxable profits up to £50,000
- Marginal relief zone (19%–25%): profits between £50,001 and £250,000 are tapered — the effective marginal rate in this band is 26.5%, so companies in this band pay more than either boundary rate on incremental profits
- Main rate (25%): applies to taxable profits over £250,000
- Associated companies: the £50,000 and £250,000 thresholds are divided equally among associated companies — a director who owns 3 connected SPVs has thresholds of approximately £16,667 and £83,333 per company
Why mortgage interest works differently inside a company
The Section 24 restriction (Finance Act 2015) limits mortgage interest relief for individual landlords to the basic rate of income tax (20%), regardless of the landlord's marginal tax rate. A higher-rate taxpayer receives only 20% tax relief on interest costs rather than 40%, increasing the effective tax cost of leveraged property ownership significantly.
Inside a limited company, Section 24 does not apply. The company deducts its full mortgage interest and finance costs against rental income as an ordinary business expense before computing the profit subject to corporation tax. For a landlord with a significant mortgage portfolio and income above the basic rate threshold, this difference alone can justify the corporate structure — but the numbers depend heavily on whether profits are retained inside the company or extracted.
Allowable deductions for buy-to-let companies
A property company can deduct the following costs from rental income before computing taxable profits:
- Mortgage and loan interest: fully deductible — the entire interest cost (unlike personal ownership post-Section 24)
- Letting agent fees and management costs: fully deductible as revenue expenses
- Repairs and maintenance: like-for-like repairs to restore to original condition are deductible; capital improvements that add value are not (they reduce the gain on eventual sale)
- Insurance premiums: landlord buildings, contents, and rent guarantee insurance
- Professional fees: accountancy fees, solicitors' costs for tenancy and compliance matters, and professional compliance subscriptions
- Director salaries: salaries paid to a director for genuine management work are deductible — they are a company expense that reduces the corporation tax charge
- Fixtures and fittings (capital allowances): qualifying items may attract Annual Investment Allowance or Writing-Down Allowances
Extracting profits: salary, dividends, and the tax layers
Corporation tax is paid on the company's profits before any dividends are paid. To access after-tax company profits personally, the director-landlord typically uses a combination of salary and dividends. Salary paid to a director reduces the company's taxable profit (it is a deductible expense) but is subject to PAYE income tax and National Insurance — both employee's (12% / 2%) and employer's (13.8% / 15% from April 2025 above the secondary threshold).
Dividends are paid from the company's post-corporation-tax profit. They attract dividend tax at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate) — with no National Insurance on dividend income. A director who retains profits inside the company and draws them as dividends in low-income years (for example, after retirement) can significantly reduce the total tax burden, which is one of the main planning advantages of the corporate structure.
Key compliance obligations for property companies
Operating a limited company for buy-to-let carries more administrative overhead than personal ownership:
- Corporation Tax return (CT600): filed with HMRC within 12 months of the accounting year-end; tax itself is due 9 months and 1 day after the year-end for companies paying under instalment thresholds
- Company accounts: prepared annually and filed with Companies House within 9 months of the year-end; most small property companies file abbreviated micro-entity or small company accounts
- PAYE / Real Time Information (RTI): if director salaries are paid, a PAYE scheme must be registered and RTI submissions made monthly to HMRC
- Annual Confirmation Statement: filed with Companies House annually to confirm the company's registered details are current
- Personal Self-Assessment: directors who receive salary, dividends, or benefits in kind must file personal Self-Assessment tax returns annually, reporting all income including amounts drawn from the company
Is a limited company right for your portfolio?
The break-even calculation depends on how much profit you retain versus extract, your personal tax rate, existing mortgage terms (many lenders charge higher rates on limited company BTL mortgages), the costs of incorporation and ongoing accountancy, and how long you plan to hold the properties. The Section 24 benefit is most pronounced for higher-rate taxpayers with heavily mortgaged portfolios who plan to retain and reinvest profits rather than extract them immediately. For a landlord with a small unencumbered portfolio who needs all the rental income to live on, the additional compliance costs and extraction tax layers may outweigh the benefit. Get modelled numbers from a chartered accountant before deciding.
Frequently asked questions
Does a buy-to-let limited company pay corporation tax on rental income?+
Yes. A limited company pays corporation tax on all its taxable profits, including rental profits. The current rates are 19% (profits under £50,000) up to 25% (profits over £250,000), with a tapered marginal rate in between. Unlike individual landlords, the company can deduct its full mortgage interest cost before computing the profit — the Section 24 restriction does not apply inside a company.
What is an SPV and how is it taxed?+
An SPV (Special Purpose Vehicle) is a limited company incorporated for the specific purpose of holding a single investment property or a small property portfolio. It is a standard limited company for tax purposes and pays corporation tax on its rental profits at the same rates as any other company. Many landlords use SPVs to keep individual properties separate for financing or estate planning purposes, but each SPV is associated with the others if under common ownership, which can affect the corporation tax rate thresholds.
Is it better to take salary or dividends from a property company?+
The optimal mix depends on your personal income from all sources. A common approach is a small salary up to the National Insurance primary threshold (around £12,570 in 2026) — enough to maintain NI contribution credits without triggering employee NI — and then dividends for additional income. Dividends up to the £500 dividend allowance are tax-free; above that, they are taxed at dividend rates (8.75%/33.75%/39.35%). The best strategy depends on your total income picture and should be modelled by an accountant.
What happens to CGT when a limited company sells a property?+
Limited companies do not pay Capital Gains Tax — they pay corporation tax on any gains realised when a property is sold, at the same corporation tax rates as profits (19%–25%). Companies do not benefit from the individual Annual Exempt Amount or the lower CGT residential rates (18%/24%). If the company holds properties for the long term, the deferred extraction of accumulated gains adds another layer of tax complexity when the company is eventually wound up or the shares are sold.
Can I transfer my existing properties into a limited company?+
Technically yes, but doing so triggers both SDLT (including the 5% buy-to-let surcharge on the transfer) and Capital Gains Tax on the gain since original acquisition, at personal CGT rates. For landlords with significant appreciation on existing properties, the transfer costs can outweigh the ongoing corporation tax benefits. The corporate structure tends to make most sense for new acquisitions or, in some circumstances, where properties are transferred between spouses as part of a broader restructure — seek specialist tax advice before any restructure.