Pros and Cons of Buying Property Through a Limited Company

“Property is not just a financial investment, it’s also a tax decision.”

More landlords than ever are buying property through limited companies. In fact, by 2024, the number of buy-to-let companies created rose by 35% year on year. That’s not a small change — it’s a tidal wave in the property market.

But here’s the big question: should you do the same?

At Cannon Accountants, we’ve helped many landlords set up property companies. Some have saved thousands in tax by doing so. Others have found it wasn’t the best option once they considered their income needs, mortgages, and long-term goals.

Let’s break it all down.

What are the tax benefits of buying property through a limited company?

Mortgage interest deductibility

When you buy property personally, you can no longer deduct your full mortgage interest from rental income (thanks to recent tax changes). Instead, you only get a basic-rate credit. For higher-rate taxpayers, this is a serious disadvantage.

In contrast, limited companies can still deduct the full mortgage interest as a business expense. For example, if your mortgage interest is £15,000 per year, a company can offset the entire amount, reducing its taxable profit. But if you held that property in your own name and you’re in the 40% tax bracket, you’d lose a big chunk of relief.

This is often the single biggest reason investors move to a company.

Lower corporation tax rates

Rental profits in a company are taxed at corporation tax rates, which range between 19% and 25% depending on profit levels. Compare that to personal income tax rates of 40% or 45% for higher earners, and the savings can be huge.

One of our clients, a landlord with four properties, switched to a company and cut their annual tax bill nearly in half.

Flexible profit extraction strategies

Companies let you choose how to extract money. You might leave profits inside the business, take a small salary, or draw dividends.

Here’s the benefit: you’re in control of when and how much tax you pay. If you don’t need the money right away, leave it in the company and reinvest in more properties — no personal tax triggered.

How are rental profits taxed in a limited company?

Corporation tax vs income tax

Inside a company, rental profits are taxed as corporation tax. That’s often cheaper than paying higher-rate personal tax on rental income.

For example, if your rental profit is £20,000:

• Personally, at 40% tax, you’d lose £8,000.

• In a company at 19%, the bill is only £3,800.

That’s a clear £4,200 difference.

Retained profits in the company

Another benefit is the ability to keep profits in the company to fund future property purchases. No additional personal tax is due until you withdraw the money.

We’ve seen landlords build property portfolios this way—letting the company “snowball” its earnings.

Impact on cash flow

But if you need to live off the rental income, the advantage shrinks. Dividends attract tax, meaning the combined cost (corporation tax + dividend tax) can sometimes exceed what you’d pay as an individual.

How much corporation tax do limited companies pay on rental income?

Current UK corporation tax rates

As of now, small companies with profits up to £50,000 pay 19%. Those with profits over £250,000 pay 25%. Anything in between uses a sliding scale.

Small profits vs main rate thresholds

This means small landlords with one or two properties often enjoy the lower rate. But if your company grows larger, the effective rate rises.

Future tax rate considerations

Rates change over time. Just a few years ago, corporation tax was 17%. Governments may adjust it again. That’s why we always run forecasts when advising clients—what looks great today may look less appealing tomorrow.

Do limited companies pay capital gains tax on property?

Corporation tax on property disposals

When a company sells a property, it doesn’t pay “capital gains tax” in the individual sense. Instead, it pays corporation tax on the gain.

So if a company makes £50,000 profit on a sale, it may owe between £9,500 and £12,500 depending on the tax rate.

Indexation allowance changes

Previously, companies could reduce taxable gains using something called “indexation allowance” (adjusting for inflation). That’s no longer available. As a result, companies often pay slightly more tax on sales than in the past.

Comparing company vs personal CGT

Individuals selling property may face 18% or 28% capital gains tax. So sometimes personal ownership can be cheaper, depending on the numbers and whether you plan to extract profits from a company.

This is why exit strategy planning is so important.

Is mortgage interest tax deductible for limited companies?

Full deduction rules

Yes, and this is one of the clearest benefits. Companies can deduct the full amount of mortgage interest as an expense.

Contrast with personal ownership restrictions

Since 2020, landlords holding property personally can only claim a 20% credit for mortgage interest. If you’re a higher-rate taxpayer, this means you can’t offset the cost fully.

Effect on higher-rate taxpayers

Let’s say your mortgage interest is £10,000. If you’re taxed at 40% personally, you effectively lose £2,000 in relief compared to company ownership. That difference, year after year, really adds up.

Can a limited company offset expenses like repairs, maintenance, and service charges?

Allowable expense categories

Yes — just as in personal ownership, but the company structure makes bookkeeping clearer.

Repairs, agent fees, service charges, and maintenance are all deductible.

Repairs vs improvements

It’s important to distinguish between repairs (deductible) and improvements (capitalised). For example, replacing a roof tile is a repair. Building an extension is an improvement.

Service charges and professional fees

If you pay a letting agent or a management company, those costs reduce taxable profit too. For many landlords, these deductions are significant.

Can I use company profits to buy property without paying personal tax?

Reinvesting retained earnings

This is one of the biggest advantages. You can reinvest company profits directly into new property purchases, without first taking them out as dividends.

Avoiding dividend extraction

For instance, if your company makes £30,000 profit, you can leave it there and use it for the next deposit. No dividend tax is triggered.

Long-term tax planning benefits

Over time, this snowball effect means you can build a portfolio much faster inside a company than you could personally.

Do I still need to pay dividend tax when taking rental profits out of the company?

Dividend tax rates

Yes. Dividends are taxed at 8.75% for basic-rate taxpayers, 33.75% for higher-rate, and 39.35% for additional-rate.

Salary vs dividend mix

Many landlords take a small salary (to maintain National Insurance contributions) and then top it up with dividends. This mix can be more tax-efficient than salary alone.

Tax-free allowances

There is a £500 annual dividend allowance, but it doesn’t go far if you’ve got multiple properties. It helps a little, but most landlords will pay dividend tax on large withdrawals.

What happens to inheritance tax if a property is held in a limited company?

Shares as part of the estate

If you own property personally, that property is part of your estate for inheritance tax (IHT). If you own it through a company, it’s your shares in the company that are part of the estate.

Business property relief limits

Sadly, property investment companies generally don’t qualify for Business Property Relief. That means the shares are still exposed to IHT.

Estate planning strategies

However, passing on shares can sometimes be easier to structure. We’ve seen families transfer shares gradually to children over time, reducing IHT exposure while maintaining control.

Can I buy property to reduce corporation tax?

Capital allowances on commercial property

Residential buy-to-lets don’t usually allow capital allowances, but commercial property is different. If your company buys, say, a small office or warehouse, you may be able to claim allowances on fixtures such as lighting, heating, or air conditioning. These deductions reduce corporation tax.

Offsetting running costs

The main tax “reduction” for residential property companies comes from offsetting mortgage interest, repairs, and admin costs. But you can’t buy a property just to wipe out corporation tax — it doesn’t quite work that way.

Limits of tax reduction strategies

We’ve had clients ask if they can buy a house simply to lower their tax bill. The answer: not really. A property should stand as a good investment in its own right. Tax savings should be the cherry on top, not the only reason.

How does selling property through a limited company affect taxes?

Corporation tax on gains

When the company sells, the gain is taxed as part of its corporation tax bill. No annual CGT exemption applies (unlike individuals, who have a yearly allowance).

Additional tax on profit extraction

If you want the cash personally, you’ll face dividend tax on top. For example, if the company makes £50,000 gain, pays £9,500 corporation tax, and you then extract the £40,500 balance as a dividend, there’s another layer of tax.

Exit strategy considerations

We often advise clients to plan before they buy. If your long-term plan is to sell and enjoy the proceeds personally, company ownership may be less tax-efficient. But if you want to hold property long term and reinvest, companies can still win out.

Is it better to buy property through a limited company or personally?

Tax efficiency comparison

For basic-rate taxpayers with one property, personal ownership can still be simpler and sometimes cheaper. For higher-rate taxpayers or those building a portfolio, companies usually make sense.

Financing and mortgage options

Company mortgages often have slightly higher interest rates. For example, a client recently compared two quotes: 5.1% personally vs 5.7% through a company. The extra cost mattered for them, though it was outweighed by the tax savings in the long term.

Long-term wealth planning

Think about your 10-year plan, not just year one. A company offers more flexibility for estate planning, reinvestment, and growing a portfolio.

What is the most tax-efficient way to buy property in the UK?

Personal vs corporate ownership

There isn’t one universal answer. Some investors save more personally, others through companies.

Use of SPVs

Most lenders prefer Special Purpose Vehicles (SPVs)—companies set up just to hold property. They’re simple, clean, and easier for banks to underwrite.

Tailored strategies by investor profile

For one client—a doctor in the 45% tax band—a company was the clear choice. For another—a young investor still under the 20% rate—personal ownership worked better. The “most efficient way” depends on your income, goals, and portfolio size.

Do limited companies pay extra 3% stamp duty?

Surcharge rules explained

Yes. All limited companies pay the extra 3% stamp duty surcharge on property purchases.

Applies to all corporate purchases

Even if it’s the first property the company buys, the surcharge applies. Unlike individuals, there’s no exemption for “first-time” purchases.

Impact on buy-to-let investors

This extra 3% can be significant. On a £300,000 property, that’s an additional £9,000 upfront.

Do limited companies pay stamp duty on buy-to-let?

Stamp duty thresholds

Yes, just as individuals do. The rate depends on the property price.

Corporate surcharges

Add in the 3% surcharge mentioned earlier, and company purchases are always taxed more heavily at the start.

Worked example scenarios

On a £400,000 buy-to-let:

• Individual (additional property): £22,000 SDLT.

• Company: £34,000 SDLT.

That’s £12,000 more for the company.

How to avoid stamp duty via limited company?

Possible exemptions

In reality, you can’t avoid SDLT entirely. The rules are designed to stop loopholes.

Group relief and restructuring

Some corporate restructures can avoid SDLT if properties are transferred within a group, but this is complex and not usually relevant for small landlords.

Why full avoidance is rare

If someone tells you there’s a “hack” to skip stamp duty, be cautious. It usually isn’t legitimate.

What fees are involved when buying property through a limited company?

Legal and conveyancing costs

Expect to pay slightly more for legal fees when buying through a company, as the process is more complex.

Mortgage arrangement fees

Company buy-to-let mortgages often come with higher arrangement fees. We’ve seen clients quoted 1.5% of the loan vs 1% for personal.

Ongoing company compliance costs

Don’t forget annual accounting, confirmation statements, and bookkeeping costs. Even a “silent” property company has admin.

Are there VAT implications when a limited company buys property?

Commercial vs residential property

Residential property purchases aren’t subject to VAT. But commercial properties sometimes are.

Opting to tax VAT

If a company buys a commercial building, it may be able (or required) to “opt to tax” and charge VAT on rents. This can be reclaimed if the tenant is VAT registered.

VAT on professional fees

Legal, accounting, and management fees are usually subject to VAT, which the company must pay (and sometimes reclaim).

How does a limited company get a mortgage?

SPV mortgage lenders

Most lenders prefer SPVs with simple structures — set up purely to hold property.

Application requirements

Directors usually provide personal details, credit checks, and company documents. Lenders want assurance that the business is straightforward.

Interest rate considerations

Company mortgage rates are often 0.5–1% higher than personal buy-to-let mortgages. Over time, this adds cost, but tax savings may offset it.

Is it harder to get a mortgage through a limited company?

Fewer lenders available

Not all banks offer company buy-to-let mortgages. The pool is smaller.

Higher deposit requirements

Many lenders ask for at least 25% deposit, sometimes 30%.

Stricter underwriting criteria

Directors often need to sign personal guarantees. That means if the company defaults, the director is personally liable.

Do lenders require personal guarantees for limited company buy-to-let mortgages?

Why PGs are standard practice

Yes—nearly always. It reassures the lender that directors are personally invested.

Risks for directors

If the company fails to pay the mortgage, the lender can come after the directors personally.

Possible ways to limit liability

Sometimes you can negotiate limited guarantees or use a holding structure, but most small investors won’t avoid PGs entirely.

How much deposit does a limited company need to buy a house?

Typical loan-to-value ratios

Most company buy-to-let mortgages cap at 75% LTV. That means at least 25% deposit.

Buy-to-let vs residential property

Deposits for buy-to-let are generally higher than for residential. Some lenders might ask for 30–35% for companies.

Impact of company structure on LTV

The simpler the structure (e.g., an SPV with ordinary shares), the more likely lenders will offer competitive terms.

Can you live in a house owned by your own limited company?

Legal restrictions

You can, but it’s complicated. Living in company property counts as a benefit in kind, which is taxable.

Benefit in kind tax issues

This means both the director and the company face extra tax charges. It often makes the setup unattractive.

Alternative structuring options

For family homes, it’s usually better to own personally. Companies are best suited for investment properties.

Can a limited company buy residential property for directors to live in?

Tax implications for directors

Yes, but the same benefit in kind issues apply. The director is taxed on the rental value of the property.

Benefit in kind charges

The company also pays Class 1A National Insurance on the benefit.

When it might make sense

It’s rare, but in some inheritance planning scenarios or if the property will later become a rental, it can be considered.

Should I transfer my property into a limited company?

Stamp duty and CGT on transfers

Transferring an existing property triggers both stamp duty and potential capital gains tax, as if you sold the property to yourself.

Mortgage refinancing needs

Your existing mortgage will also need to be refinanced into the company, often at higher rates.

When transfers are beneficial

It may make sense if you have multiple properties and expect to hold them long-term, but for most single-property landlords, the costs outweigh the benefits.

Is property bought through a limited company protected from personal creditors?

Limited liability explained

Yes, limited companies shield your personal assets from business creditors.

When personal guarantees override protection

But if you’ve signed a personal guarantee for the mortgage, that protection doesn’t apply to the lender.

Risks in insolvency situations

In practice, your personal liability depends on how the company is structured and what guarantees you’ve given.

Can you lose your house if you are a limited company?

Company ownership rules

If the company owns the house, it belongs to the company, not you.

Creditor claims on company assets

If the company goes insolvent, creditors can claim company assets—including the house.

Protection vs personal risk

Your personal home (if owned privately) is usually safe unless you’ve personally guaranteed company debts.

Do I need to set up a special purpose vehicle (SPV) company to buy property?

What an SPV is

An SPV is simply a company created solely to hold property.

Why lenders prefer SPVs

They’re clean and simple, without other trading activities. This makes lenders more comfortable.

When a trading company may suffice

It’s possible to use an existing trading company, but most mortgage lenders won’t lend to it.

What’s the difference between buying property through a trading company and an SPV?

Mortgage lender preferences

SPVs are almost always required for mortgages.

Tax treatment differences

There’s no difference in tax treatment, but trading companies may complicate accounting.

Risk separation benefits

Using an SPV keeps property risks separate from your main trading business.

What are the accounting requirements for a property investment company?

Annual accounts filing

Every company must file statutory accounts with Companies House.

Corporation tax returns

CT600 corporation tax returns are required annually with HMRC.

Record-keeping obligations

Accurate records of income, expenses, and mortgage payments must be kept. Many landlords underestimate this.

What are the running costs of a property investment company?

Accounting and filing fees

Expect annual accounts to cost £600–£1,200 depending on complexity.

Annual confirmation statements

A small but essential compliance cost—£13 if you file yourself, more if through an agent.

Professional advisory costs

You’ll likely need ongoing tax and legal advice, especially as your portfolio grows.

Is it worth using a holding company for property investments?

Benefits of a holding structure

A holding company can own multiple SPVs, each with different properties. This offers flexibility and risk separation.

Tax deferral opportunities

Profits can move between subsidiaries without triggering tax, allowing reinvestment across the group.

Complexity and compliance costs

But with complexity comes extra admin. For most small landlords, a holding company is overkill. It’s more common in larger portfolios or family offices.

Final Thoughts

Buying property through a limited company is not a one-size-fits-all decision. It has clear tax benefits — particularly for higher-rate taxpayers and those building a portfolio. But it also comes with extra responsibilities: higher mortgage rates, more admin, and dividend tax when withdrawing profits.

At Cannon Accountants, we’ve seen both sides. One client built a 10-property portfolio in a company and saved thousands in tax by reinvesting profits. Another came to us after setting up a company because “someone online said it was best”—only to find it actually cost them more once dividend taxes were considered.

The lesson? Run the numbers. Think long-term. And above all, get proper advice.

👉 If you’re weighing up whether to buy your next property personally or through a company, let’s have a conversation. A short chat today could save you years of costly mistakes.

‍