The core argument for an SPV is tax efficiency under Section 24. An individual landlord with a £200,000 interest-only mortgage paying 5% interest, £10,000 per year, can only offset this as a 20% basic rate credit (£2,000) rather than a full deduction. A higher-rate taxpayer who would previously have saved £4,000 in tax now saves only £2,000. The SPV eliminates this penalty: the company deducts all £10,000 from rental profit before calculating its corporation tax bill.
But the SPV route has costs. Most lenders charge higher rates for company BTL mortgages. Extracting profit from the company creates an additional personal tax layer. Transferring existing personally-held properties into a company triggers SDLT at market value plus potential CGT. For landlords with existing mortgages due for remortgage, the switch often involves material costs.
How Section 24 affects individual landlords
Section 24 phased out mortgage interest deductibility for individual landlords, fully effective from April 2020:
- Individual landlords can no longer deduct mortgage interest, loan interest, or arrangement fees as an allowable rental expense
- Instead, they receive a tax credit of 20% of finance costs, the basic rate of income tax
- For a basic rate taxpayer whose total income remains in the basic rate band, the credit equals what the deduction would have saved, no net impact
- For higher-rate (40%) or additional-rate (45%) taxpayers, the credit is worth less than the former deduction, creating a direct tax increase
- Example: £10,000 of mortgage interest per year. Higher-rate landlord formerly saved £4,000. Now receives 20% credit = £2,000. Annual tax increase: £2,000
- Section 24 applies to individuals, partnerships, and LLPs. It does NOT apply to limited companies
How a limited company (SPV) avoids Section 24
A property SPV is a limited company whose purpose is holding and letting property:
- Full mortgage interest deductibility: The company deducts 100% of mortgage interest and finance costs from rental income before calculating taxable profit, Section 24 does not apply to companies
- Corporation tax on profit: Net rental profit is taxed at the company corporation tax rate, 19% for profits up to £50,000; 25% for profits above £250,000; a tapered marginal rate between those thresholds
- Retained profit: If you do not need to extract the profit for personal income, it sits in the company at the lower corporation tax rate and can be reinvested, this is the greatest advantage for portfolio-building landlords
- Dividend extraction: When you draw profit as dividends, you pay dividend tax on top of corporation tax: basic rate 8.75%, higher rate 33.75%, additional rate 39.35%
- Salary extraction: You can pay yourself a salary from the company up to the NIC threshold (~£12,570), reducing company profit and creating a personal income tax liability
When the SPV makes financial sense
The SPV structure is most advantageous in specific circumstances:
- Higher-rate taxpayer with significant mortgage finance costs: The Section 24 uplift is largest for 40–45% taxpayers. The SPV neutralises this penalty entirely
- Portfolio builder retaining profits: If you plan to reinvest rental profits into further property purchases rather than drawing income, the lower corporation tax rate is a material advantage
- New purchases from the outset: Buying future properties in an SPV from day one avoids the SDLT and CGT costs of transferring existing property
- Long-term hold strategy: The company structure enables estate planning (gifting shares) and IHT mitigation not available for personally held property
- The structure is typically not advantageous if: you are a basic rate taxpayer; you need to extract all rental profit each year; or the higher company BTL mortgage rate offsets the tax saving
Costs and risks of the SPV structure
Before incorporating, understand the full cost picture:
- Higher mortgage rates: Company BTL mortgages typically carry a slightly higher rate than personal BTL products, on a £300,000 mortgage, a 0.3% premium costs £900/year. Compare this to the Section 24 tax saving
- Accountancy costs: A company requires annual accounts and corporation tax filings, typically £800–£2,000/year for a simple SPV
- SDLT on transfer: Transferring personally held properties into a company is treated as a sale at market value. SDLT is payable including the 3% second-home surcharge
- CGT on transfer: Transferring a property with an embedded gain into a company realises that gain for CGT purposes. Incorporation relief may be available if you transfer your entire property rental business as a going concern
- Mortgage availability: The SPV product range is smaller than the personal BTL market, this can limit your choice at remortgage
Frequently asked questions
Can I transfer my existing buy-to-let properties into a limited company?+
Yes, but the transfer is treated as a disposal at market value for both SDLT and CGT purposes. SDLT is payable on the market value of each property (including the 3% surcharge) and any embedded capital gain is realised. Incorporation relief under TCGA 1992 s162 can defer CGT if you transfer your entire property rental business as a going concern, but this requires careful structuring and professional advice. For most landlords with existing mortgages, the cost of transfer is prohibitive and a new-purchase strategy makes more sense.
Will lenders accept a limited company for a buy-to-let mortgage?+
Yes, most major BTL lenders now offer company mortgages. The product range is smaller than the personal market but has grown significantly since 2020. Most company BTL mortgages require personal guarantees from the directors. The company must be an SPV (SIC code 68209 or similar), trading companies are generally not accepted. Check with a specialist mortgage broker before committing to a company structure.
Is an SPV right for a basic rate landlord?+
Rarely. If your total income remains within the basic rate band (up to £50,270 in 2025/26), Section 24 has no net impact. Adding corporation tax, dividend tax on extraction, higher SPV mortgage rates, and accountancy costs almost always results in a worse outcome than personal ownership. The SPV advantage is concentrated in higher-rate and additional-rate taxpayers with significant finance costs. Take specialist property tax advice before making any structural decision.
Do I pay National Insurance on SPV profits?+
No National Insurance is payable on dividend income. If you pay yourself a salary up to approximately £12,570/year (the NIC primary threshold), no employee NIC is due. Most SPV landlords pay themselves a minimal salary up to the NIC threshold and take remaining profit as dividends to minimise NIC exposure.