Buy to Let Through a Limited Company: When the Structure Pays For Itself

Most landlords ask this question in the wrong order. They ask whether a company saves tax, hear that it does, and start moving properties. The better question is how long the structure takes to earn back what it costs to set up, because that answer changes completely depending on whether you are buying your next property or moving the four you already own.

We act for landlords across Cardiff, Newport and Bristol, and the split is consistent. For a landlord buying their next property, the company is often the cheaper route from day one. For a landlord with an established portfolio held personally, the entry cost is real and it has to be paid before any saving starts. This guide sets out both sides with the current rates, including the change to property income tax that arrives in 2027. If you would rather talk it through, our limited company accountants in Cardiff work with property businesses every week.

Key takeaways

Why did owning buy to let property personally get more expensive?

Before 2017, a landlord deducted mortgage interest from rental income and paid tax on what was left. That ended with the finance cost restriction, usually called Section 24. Interest is no longer a deduction against rental profit for an individual. Instead you declare the full rent, pay tax on it, and receive a tax reducer worth 20 per cent of the finance cost.

For a basic rate taxpayer the outcome is broadly similar. For a higher rate taxpayer it is not, because the rent is taxed at 40 per cent while the relief comes back at 20. The restriction also inflates your declared income, which is how landlords find themselves pushed into a higher band, or losing the personal allowance, on a portfolio whose actual cash profit never moved.

Something changes in 2027. Finance Act 2026 introduces separate property income rates of 22, 42 and 47 per cent from the 2027 to 2028 tax year, and moves the finance cost reducer from 20 per cent to the new property basic rate of 22 per cent. On £1,000 of finance costs that is a reducer of £220 rather than £200. It softens the restriction slightly. It does not remove it.

How is a buy to let limited company taxed differently?

Inside a company, mortgage interest goes back to being an ordinary business expense. It comes off rental profit before corporation tax is worked out, in full, at whatever rate the company borrows at. That is the whole structural argument, and everything else is a cost or a complication attached to it.

Corporation tax for the 2026 financial year is 19 per cent on profits up to £50,000 and 25 per cent above £250,000, with marginal relief smoothing the band in between. Those thresholds are divided by the number of associated companies, so a landlord who already runs a trading company through the same ownership will find the small profits limit shared rather than doubled.

One trap worth naming. A company that mainly holds investments can be treated as a close investment holding company and loses the small profits rate entirely, paying 25 per cent on everything. Commercial letting to unconnected tenants is specifically carved out, so an ordinary buy to let company letting at arm’s length is normally fine. Letting to family is where this bites, and it is the detail that catches landlords who put a property into a company and then house a relative in it.

What does it cost to move a property into a limited company?

This is where most of the arithmetic is won or lost. Selling a property to your own company is a disposal at market value even though no stranger is involved and no money may change hands. Capital gains tax applies at 18 or 24 per cent, against an annual exempt amount of £3,000.

The company then pays purchase tax on the way in, on the same property, for the second time in its life. In England that is stamp duty land tax with the five per cent additional dwellings surcharge, which rose from three per cent on 31 October 2024. There is also a flat 17 per cent charge on dwellings over £500,000 bought by a company, although a genuine property rental business normally qualifies for relief from it and pays the banded rates instead.

Wales works differently and is often missed. There is no flat rate equivalent in Welsh law. Land Transaction Tax applies its higher residential rates, banded from five per cent, with the threshold starting at £40,000. A Cardiff landlord and a Bristol landlord doing the same transaction are working to two different tax codes, and advice written for one does not transfer to the other.

Run the payback period before you run the structure.

Do I have to claim incorporation relief now?

Incorporation relief under section 162 can defer the capital gain when a property business is transferred to a company in exchange for shares. It is the single biggest lever in the whole calculation, and the rules around it moved this year.

For transfers on or after 6 April 2026, the relief must be claimed in your Self Assessment return. It used to apply automatically unless you elected out, and section 162A has been repealed. A landlord who incorporates and assumes the relief will simply happen is now exposed to a gain they did not plan for. If you incorporated earlier this year, check the claim is going in.

The relief also depends on the letting being a business rather than a passive investment, and that is a question of fact. In Ramsay, the Upper Tribunal held that ten flats taking around twenty hours of work a week amounted to a business, and HMRC’s own guidance has settled on roughly twenty hours a week as the practical test. A landlord with two properties and a managing agent is unlikely to clear it.

How do you take money out of a property company?

A company owns its profit. You do not. That sounds obvious until a landlord who has always treated rent as personal income meets the second layer of tax on the way out.

Dividends for 2026 to 2027 are taxed at 10.75, 35.75 and 39.35 per cent, with a dividend allowance of £500. A small director salary is usually taken alongside, and employer National Insurance runs at 15 per cent above the secondary threshold of £96 a week. The Employment Allowance is not available where a sole director is the only employee paid above that threshold, which is exactly the shape of most landlord companies.

Put plainly: if you need the rent to live on, a company adds a tax layer and some administration without removing much. If you are reinvesting the profit into the next deposit, the money never leaves the company and the second layer never arrives. That single question settles more of these cases than any rate comparison.

What are the ongoing obligations of a buy to let company?

A limited company brings duties an individual landlord does not have. Annual accounts and a corporation tax return. A confirmation statement. Directors’ responsibilities under the Companies Act. Records kept to a company standard rather than a shoebox standard.

There is also the Annual Tax on Enveloped Dwellings, which applies to companies holding residential property worth more than £500,000. For 2026 to 2027 the charge runs from £4,600 to £303,450 depending on value. A genuine property rental business qualifies for relief, so most landlord companies pay nothing. They do still have to file a Relief Declaration Return to claim it, and a company that quietly does not file is the commonest avoidable penalty we see in this area.

• Annual accounts and a corporation tax return every year
• Confirmation statement filed with Companies House
• Relief Declaration Return where the property exceeds £500,000
• Separate business bank account and clean bookkeeping
• Payroll registration if a director salary is taken

When does a buy to let limited company actually pay off?

The general case is useless here, because incorporation turns almost entirely on gearing, marginal rate and whether profit is retained. These three cover most of the landlords who ask.

One flat, no mortgage, basic rate taxpayer. There is nothing for the finance cost restriction to bite on, so the thing driving most incorporations does not apply. Personal ownership is taxed at 20 per cent now and at the property basic rate of 22 per cent from 2027 to 2028. A company would pay 19 per cent corporation tax and then dividend tax at 10.75 per cent to get the money out, which is worse, before counting the stamp duty and capital gains tax cost of moving the property in at all. This landlord should not incorporate.

Four properties, geared at about 70 per cent, higher rate taxpayer, profit reinvested. This is where the case is strongest. The finance costs are fully deductible against company profits rather than giving a 20 per cent tax reducer, and the profit stays inside the company at 19 or 25 per cent rather than being taxed at 40 per cent personally. The constraint is the entry cost: the transfer is a disposal at market value for capital gains tax and a stamp duty land tax or land transaction tax event at market value too, even though no money changes hands.

Two properties, higher rate taxpayer, income needed to live on. The hardest case, and the one most often got wrong. Every pound taken out of the company is taxed twice, at 19 or 25 per cent inside and then at 35.75 per cent on dividends from 6 April 2026. The gap against personal ownership narrows sharply, and once the entry cost is amortised over a realistic holding period the answer is frequently no.

The pattern across all three is the same. Incorporation rewards leverage and retention. It punishes extraction and short holding periods.

The answer is arithmetic on your own figures, not a rule of thumb about property counts.

What should I decide before incorporating my portfolio?

If you can answer these five honestly, you already know whether to do it.

1. What is your marginal rate, and will it still be that in five years? The whole case is built on the gap between your personal rate and the corporation tax rate. A landlord who is about to retire or reduce hours has a different answer from one whose income is rising.

2. How much of the rent do you need to live on? Money retained in the company is taxed once. Money extracted is taxed twice. This single question moves more incorporations from yes to no than anything else.

3. What is the entry cost, in cash, this year? Capital gains tax on the deemed disposal at market value, stamp duty land tax or land transaction tax at the higher rates on the same market value, plus legal and lender costs. Incorporation relief may defer the gain where the activity amounts to a business, but from 6 April 2026 it has to be claimed in the Self Assessment return and is no longer automatic.

4. How long will you hold? The entry cost has to be recovered out of the annual tax saving. Divide one by the other and you have your break even in years. If that number is longer than you intend to hold, stop.

5. Who will live in the properties? Letting to a connected person risks close investment holding company status, which costs the 19 per cent small profits rate and marginal relief and leaves the company paying 25 per cent on everything.

Those five are the agenda for the free call. Bring the rough numbers and we will work the break even through with you.

Which landlords benefit from a limited company and which do not?

There is no universal break even figure, and anyone who gives you one has not looked at your numbers. What we can give you is the shape of the answer.

It tends to pay when you are a higher or additional rate taxpayer, the portfolio is geared, the profit is being reinvested rather than drawn, and you are buying rather than moving. In that combination the interest deduction works from the first month and there is no entry cost to recover.

It tends not to pay when there is one property, little or no mortgage, or you need the income to live on. It also tends not to pay when the gain sitting in the property is large enough that the capital gains charge on the way in swallows years of saving, and incorporation relief is not available because the letting is not a business.

Between those two is the real work, and it is arithmetic rather than opinion. We model the payback period against your actual figures: the gain, the purchase tax in the right jurisdiction, the lending, and what you intend to do with the profit. If you have undeclared rental income from earlier years, deal with that first through the Let Property Campaign, because a disclosure is harder once the property has moved.

Thinking about your next property?

We will model the structure against your figures before you commit to either route.

See How We Support Property Companies

Is buying through a company different in Wales and England?

Most of our property work sits along the M4, and the border runs straight through the middle of it, which matters more than people expect.

Buying in Wales. Cardiff and Newport purchases pay land transaction tax, not stamp duty land tax. The higher residential rates for additional properties, which include every company purchase, start at 5 per cent up to £180,000 and run to 17 per cent above £1.5 million, and they have applied to contracts exchanged on or after 11 December 2024. There is no Welsh equivalent of the flat 17 per cent charge that catches some English company purchases over £500,000.

Buying in England. Bristol purchases pay stamp duty land tax, with the higher rates for additional dwellings at 5 per cent up to £125,000 rising to 17 per cent above £1.5 million since 31 October 2024. A company buying a dwelling over £500,000 faces a flat 17 per cent charge unless a relief applies, and for a genuine letting business property rental business relief normally takes it back to the banded rates. That relief has conditions and they have to keep being met.

Welsh landlords and the 2027 rates. The new property income rates of 22, 42 and 47 per cent are legislated for England, Wales and Northern Ireland, but Finance Act 2026 section 8 also hands the Senedd the power to set Welsh property rates from 2027 to 2028. At the time of writing no Welsh rates had been set, so a Cardiff or Newport landlord should not assume the 22, 42 and 47 figures will be theirs.

A portfolio spanning both sides of the Severn is taxed under two property tax regimes at purchase and, from 2027 to 2028, potentially two sets of income tax rates as well. That is an argument for getting the structure right before the next purchase rather than after it.

A portfolio either side of the Severn sits under two property tax regimes. That is worth knowing before the next offer, not after.

Buy to let limited companies: common questions

Where to go next

This guide is general information based on rates and legislation current at 9 October 2026, not advice for your situation. Any outcome described by a client is their own past result and not a promise. Please take advice before acting.