Personal vs limited company ownership
How holding property personally compares to a limited company. The trade-offs, the Section 24 effect, and when each makes sense.
In one sentence
Personal ownership is simpler but exposes higher-rate landlords to Section 24; a limited company keeps full mortgage interest deductibility but adds Corporation Tax, accounts, and director admin.
Quick answer
- Personal: simpler, lower compliance, but Section 24 hits higher-rate taxpayers
- Limited company: full mortgage interest deductibility, Corporation Tax on profits, dividends taxed when extracted
- Transferring an existing personally-owned property in to a company triggers SDLT and CGT
- Generally only worth a company if you are a higher-rate taxpayer with material mortgage interest
The headline trade-off
Personal ownership is simple — rental profit is taxed as part of your income, no separate company accounts, no Corporation Tax. The downside, since 2017, is Section 24: mortgage interest relief is restricted to a 20% basic-rate tax credit.
A limited company sidesteps Section 24. Mortgage interest is fully deductible against rental profit, which is then taxed at Corporation Tax rates. But the structure adds complexity: company accounts, CT600 returns, payroll if you take a salary, and an extra layer of tax when you take money out as dividends.
Personal ownership: pros and cons
Pros
- Simple — one Self Assessment, no separate accounts
- Lowest compliance cost
- Rental losses carry forward against future rental profits
- Capital gains use the personal CGT annual exemption
Cons
- Section 24 — mortgage interest only gets 20% relief
- Profit added to other income can push you into higher-rate bands
- Limited inheritance tax planning options
Limited company ownership: pros and cons
Pros
- Mortgage interest fully deductible against rental profit
- Profits taxed at Corporation Tax rates (lower than higher-rate income tax for many)
- More flexible profit extraction — salary, dividends, retained for reinvestment
- Separates property ownership from your personal estate (potentially helpful for IHT and lender risk)
Cons
- Annual accounts, CT600, and confirmation statement filing
- Buy-to-let mortgages for limited companies can be more expensive
- Dividends are taxed when extracted — there is a "double tax" effect
- No personal CGT annual exemption
- Transferring an existing personally-owned property triggers SDLT and CGT — usually not worth doing for one or two properties
When does each make sense?
A rough rule of thumb (not advice — get a personalised calculation):
- Basic-rate taxpayer with little mortgage interest: personal ownership is usually fine
- Higher-rate taxpayer with substantial mortgage interest on multiple BTLs: a limited company structure for new acquisitions often saves tax over the long run
- Already own properties personally: usually best to keep them personal and use a company for new purchases — transferring in is rarely cost-effective
The decision is rarely just about tax
Lender choice, finance costs, your time horizon, your other income, and your retirement plans all change the answer. The right structure for someone planning to grow a 15-property portfolio is different from the right structure for one buy-to-let alongside a job.
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