Buying Property Through a Limited Company: When It Pays

Around three quarters of new buy to let purchases in the UK are now made through a limited company, according to research published in February 2026 by Hamptons, the estate agency, from its own analysis of Companies House filings. That is a striking figure, and it is also the wrong reason to incorporate.

The answer to the question is narrower than the trend suggests: a company usually wins for a higher rate taxpayer who borrows heavily and can leave the rent inside the business, and it usually loses for a basic rate taxpayer who buys with little or no debt and needs the income to live on. The arithmetic below shows where the line sits in the 2026 to 2027 tax year, and how it moves in April 2027.

Why up to three in four buyers use a company

The shift is real and it is recent. Hamptons counted 66,587 new companies set up to hold buy to let property during 2025, an increase of 8% on 2024 and 363% over the decade, which made them the second most common type of new business registered in the UK that year.

The same analysis of Companies House filings put the register at about 443,000 buy to let companies at the end of 2025, with 5,922 more set up in January 2026 alone, 11% up on the same month a year earlier.

One number in that set deserves care. Other measures of the same shift put it materially lower, partly because they count only mortgaged purchases.

It also measures new purchases, not the stock of rented homes in the country. How much of the existing stock is company owned is contested, and the surveys that claim to measure it disagree sharply, partly because they do not all measure the same thing: some count landlords, some count properties, some count value.

What is not contested is the direction. Property already held personally does not move into a company for free, because incorporation triggers a capital gains bill and a stamp duty bill, so the stock turns over far more slowly than the flow. The two get quoted interchangeably, which is how a statistic about what buyers did this year becomes a claim about how the whole rental market is owned.

The cause is a single rule. Since 6 April 2020, an individual landlord letting residential property cannot deduct mortgage interest as an expense.

Relief is restricted to the basic rate of income tax and given as a reduction against the tax bill instead, calculated on the lowest of three figures: the finance costs, the profits of the property business, and adjusted total income.

Companies are outside that restriction entirely and deduct their interest in the ordinary way. We set out the mechanism in full in our guide to Section 24 and why landlords buy through companies.

The tax gap, worked through

Take a £200,000 property bought at 75% loan to value, so a £150,000 mortgage. The comparison site Moneyfacts put the average two year fixed buy to let rate at 75% loan to value at 5.27%, as at 1 August 2026.

That is an average across the products Moneyfacts tracks rather than a quote anyone was offered, and the table updates, so check the current figure before you rely on it. At that rate the interest is £7,905 a year.

Assume rent of £12,000 and £2,000 of other allowable costs for letting, insurance and maintenance. The price, the loan to value, the rent and the running costs are all illustrative; the interest rate and every tax rate applied below are sourced. Cash profit before tax is £2,095.

For a higher rate taxpayer owning personally, taxable rental profit is £10,000, because the interest is not deducted. Tax at 40% is £4,000, reduced by 20% of the £7,905 of finance costs, which is £1,581. The bill is £2,419 against cash profit of £2,095. The property makes money and the landlord is £324 a year worse off for owning it.

The same property inside a company deducts the interest in full and pays corporation tax on the real profit of £2,095. At the small profits rate of 19%, which HMRC applies to company profits under £50,000, that is £398, leaving £1,697 retained in the business. The gap between the two structures on one modest property is £2,021 a year.

Then comes the part the comparison usually stops short of. Money in a company is not money in your pocket. Taking that £1,697 out as a dividend costs a higher rate taxpayer 35.75% on the amount above the £500 dividend allowance, assuming that allowance is not already used elsewhere.

That is 35.75% of £1,197, or £428, leaving £1,269 in hand.

None of those figures yet counts what the company costs to run. Add an illustrative £1,000 a year for accounts and filings, deducted before corporation tax, and the company’s profit falls to £1,095. Corporation tax at 19% is £208, leaving £887 retained, and dividend tax on the £387 above the allowance is £138, leaving £749 in hand.

The advantage over personal ownership falls from £1,593 to about £1,073. Larger running costs shrink it further, so on a single modest property the fee is the number to check before anything else.

The gap widens slightly in April 2027. The Finance Act 2026 sets a property basic rate of 22%, a property higher rate of 42% and a property additional rate of 47% for the 2027 to 2028 tax year. Those rates apply to the property income of individuals and not to companies, and we cover them in full in our guide to the 2027 landlord tax changes.

Schedule 1 of the same Act moves the finance cost relief from the basic rate to the property basic rate, so relief rises to 22% at the same time the charge rises to 42%. On the figures above, the personal position moves from a £324 loss to a £366 loss.

This is already law rather than a proposal. The Finance Act 2026 received Royal Assent on 18 March 2026, so the rates have been law since then; they apply from 6 April 2027.

What a limited company costs you

The company side of the ledger has its own costs, starting with the one most people expect.

Stamp duty is usually not the difference. A company pays the higher rates of Stamp Duty Land Tax, which have run at 5%, 7%, 10%, 15% and 17% across the bands since 1 April 2025. So does any individual buying a property that is not the only one they own.

The surcharge itself rose from 3% to 5% on 31 October 2024, so anyone working from a pre-2025 calculation is using the wrong number. On the £200,000 example the bill is £11,500 either way.

The exception matters and is easy to miss: an individual buying a rental who owns no other property pays the standard rates, which is £1,500 on the same purchase. Our 2026 stamp duty guide sets out the bands in full.

Above £500,000 the corporate position worsens. A 17% flat charge applies to dwellings bought by companies over that price, and relief from it is available where the property is used in a property rental business, which a normal buy to let is.

Relief has conditions and has to be claimed correctly. The related Annual Tax on Enveloped Dwellings works the same way, and the point that catches people is that a company whose relief reduces the charge to nil still has to submit a Relief Declaration Return every year.

Running costs are real. Accounts, a confirmation statement and a corporation tax return are an annual professional fee rather than a form you fill in yourself, and directors carry filing duties with penalties attached. On a single property that fee can take a large share of the tax saving, as the worked example shows.

The corporation tax rate is not fixed at 19%. It rises to 25% above £250,000 of profit with marginal relief in between, and the £50,000 and £250,000 limits are shared across associated companies.

HMRC’s own example is that a company with three other associated companies has the limits divided by four. So a landlord holding six properties in six separate companies does not get six sets of small profit limits, each company gets a sixth of one. That is a common and expensive misunderstanding.

Lending is less of an obstacle than it was. Moneyfacts reported in October 2025 that limited company landlords had more choice and could find lower rates than in previous years. That is a comparison site describing its own panel rather than a market statistic, so treat it as a reason to shop the whole market rather than as a guarantee of price. Fees vary more than headline rates on company products, so compare the total cost over the fixed term.

When owning property personally wins

A company is not a default. It loses in four situations that are common rather than obscure:

• If you are a basic rate taxpayer, the restriction barely touches you, because relief at the basic rate is close to the deduction you would otherwise have had, unless adding the interest back into your taxable income pushes you into the higher rate band. The company then adds cost and complication to solve a problem you do not have.
• If you buy with cash or with very little debt, the whole advantage disappears. The gap in the worked example comes from £7,905 of interest. Remove the mortgage and the two structures produce nearly the same result, with the company slightly behind once fees are counted.
• If you need the rent as income, the extraction cost is a permanent drag rather than a one off. Dividend rates rose for the 2026 to 2027 tax year under section 4 of the Finance Act 2026, from 8.75% to 10.75% at the ordinary rate and from 33.75% to 35.75% at the upper rate. That change moved specifically against the company case.
• If you are considering moving property you already own into a company, treat it as a different question with a much higher bar. Incorporation is normally a disposal for capital gains purposes, taxed at 18% or 24% on residential property, rates that have applied since 6 April 2024 and which we work through in our guide to capital gains tax on a rental sale, and stamp duty is generally payable on the transfer at the higher rates.

Incorporation relief under section 162 of the Taxation of Chargeable Gains Act 1992 can defer the capital gains charge where a landlord genuinely runs a business rather than passive letting, which is a high bar that HMRC scrutinises, and since 6 April 2026 it has to be actively claimed, on the transferor’s own tax return, by the first anniversary of the 31 January following the tax year of the transfer.

Deferral is not exemption. If your eventual exit is a sale of the company rather than the properties, our note on a share sale against an asset sale covers what a buyer will actually pay for.

What this means for property investors

Decide the structure before you agree a price, not after. The same building produces materially different net returns personally and corporately, and underwriting on gross yield hides the difference completely. Put the tax in the same model as the rent.

Run your own version of the worked example above with four numbers: your marginal income tax rate, the actual interest on the actual loan you will take, whether you will draw the rent or leave it in, and what the company will cost to run each year. Those four decide it.

Do not incorporate to solve a problem you do not have. A lightly geared basic rate landlord who needs the income is the clearest case for personal ownership, and the trend statistic is not an argument against that.

Treat the 2027 rates as a planning input rather than news. They are already enacted and simply do not take effect until 6 April 2027, which is precisely the position in which a structuring decision made now should account for them. Model the year after next, because a purchase made this month will still be held then.

Take advice on your own figures. This is a description of how the rules work and not tax advice, and the incorporation question in particular turns on facts an article cannot know.

If you are weighing this up against real stock rather than in the abstract, you can see the investment property we currently have available and run the numbers both ways on a specific building.