Buying a rental property through a limited company is now a mainstream route for UK landlords. The structure can help manage tax, ring-fence risk, and make portfolio growth more straightforward. Yet it adds admin and costs, so the right choice depends on your income, goals, and time horizon. This step-by-step guide explains how the structure works, when it helps, what it costs, and the practical actions to take before you commit.
Limited company vs personal ownership at a glance
Tax on profits and mortgage interest relief
In personal ownership, finance costs (like mortgage interest) are restricted and relieved via a basic-rate credit. In a company, mortgage interest is typically deducted in full before profit, which can be helpful for highly leveraged portfolios. Company profits are taxed at corporation tax rates. Your personal tax is only due when you take money out (salary or dividends). The net outcome depends on your rent, interest costs, and how much cash you actually need to draw.
Liability, ownership and estate planning
A company offers limited liability, which helps ring-fence property risks from your personal finances. Shares can be split between family members for succession planning, allowing structured ownership and potential estate planning advantages. Professional advice is essential because these decisions affect control, voting rights, and future taxes.
When a company structure tends to win
A company often makes sense for higher-rate taxpayers, landlords planning to reinvest profits, or anyone building a multi-property portfolio where retained earnings will fund deposits and refurbishments. If you own one low-geared property and need all the income now, personal ownership can still be simpler.
How a buy-to-let SPV works
What an SPV is and suitable SIC codes
Most lenders prefer a “special purpose vehicle” (SPV) limited company: a company that does nothing except hold and let property. Standard Industry Classification (SIC) codes commonly used include 68100 (buying and selling of own real estate) and 68209 (other letting and operating of own or leased real estate). Your accountant or broker can confirm the best combination for your plan.
Directors, shareholders and personal guarantees
Directors run the company; shareholders own it. Lenders usually require personal guarantees from the directors and major shareholders, even though the company is the borrower. Expect lenders to look through to your personal income, assets, and credit history.
Getting money out: salary, dividends and director’s loans.
You can take a small salary (to access state pension credits and keep PAYE compliant) and the rest as dividends, subject to dividend tax bands. If you inject cash to buy a property, track it as a director’s loan; you can repay it from surplus rents without extra tax, provided the loan account is in credit. Keep clean records from day one.
Mortgages for company landlords
Lender criteria, LTVs, rates and fees
Many UK lenders offer company BTL mortgages. Loan-to-value caps and pricing are broadly similar to personal BTL, though product fees can be higher. Pay attention to arrangement fees expressed as a percentage of the loan; on larger mortgages, that headline rate can hide a big fee.
Stress tests and rental coverage requirements
Lenders “stress test” rental income to ensure the property covers payments at a buffered rate. Coverage ratios vary by product, property type, and whether you are using a limited company. Work with a whole-of-market broker early; they will match your rent, deposit and income to the right lender to avoid last-minute surprises.
Remortgaging and scaling a portfolio
Once a property is let and the accounts look healthy, you may remortgage to pull out equity for the next purchase. A limited company structure is designed for recycling capital: profits can remain in the company, build cash reserves, and support future deposits without triggering personal tax until you actually withdraw funds.
Set up steps for a BTL limited company.
Choose structure, share split and PSC details
Decide who will be directors and shareholders. Think about long-term control, dividend flexibility, and inheritance planning before you incorporate. Record Persons with Significant Control (PSC) accurately. If you’re investing as a couple, consider share classes that allow different dividend levels without changing ownership of the property itself. Seek tailored professional advice; small decisions at incorporation echo for years.
Companies House registration and business bank account
Incorporate with Companies House and open a dedicated business bank account. Keep all rent and expenses flowing through that account to preserve clean bookkeeping. Avoid mixing personal and company money—this prevents messy director’s loan balances and keeps lenders comfortable.
Register for taxes and set up bookkeeping.
Register for corporation tax after incorporation and keep on top of filing deadlines. From day one, set up simple, consistent bookkeeping for rent, deposits, service charges, mortgages, repairs, and capital works. Choosing reliable landlord accounting software UK helps standardise records, track director’s loans, and produce tidy reports for your accountant and lender.
Running costs and ongoing admin
Accounting, filings and deadlines
Expect annual accounts, a corporation tax return, and a Confirmation Statement for Companies House. Budget for accountancy fees and allow time for information gathering—rental statements, mortgage summaries, insurance schedules, and invoices for works. A smooth year-end starts with monthly reconciliations.
Insurance and professional services
Core policies typically include buildings insurance and landlord liability cover. Many landlords add rent guarantee and legal expenses insurance. Keep broker details, policy numbers, and renewal dates in one place. Maintain a roster of reliable trades, an electrician for EICRs, and a gas engineer for annual Gas Safety checks if applicable.
Record-keeping for repairs vs improvements
Repairs keep the property in working order and are usually deductible from profits. Improvements enhance or alter the asset and are capital in nature. Record them separately. Keep photos and invoices with clear descriptions; this saves time when preparing accounts and when you eventually calculate gains on sale.
Tax essentials for company BTL
Allowable expenses and full interest deduction
Common allowable expenses include letting agent fees, insurance, safety certificates, accountancy, and repairs. In a company, mortgage interest is normally an expense against profit rather than a restricted credit. Use a robust chart of accounts so every cost is captured in the right bucket.
Stamp Duty Land Tax surcharge on purchases
Additional dwellings attract the 3% SDLT surcharge, and company purchases do not get first-time buyer relief. Model SDLT before you agree a price; on higher-value properties, the surcharge is material and should shape the negotiation.
Capital gains on the sale and options to sell shares
If the company sells a property, it may realise a chargeable gain. An alternative route, used in some transactions, is the company of sale shares instead of the asset. That can introduce different tax and due diligence considerations for both sides. Take advice early—structuring the exit is as important as structuring the purchase.
Extracting income and avoiding double taxation traps
Think in two layers: the company’s tax and your personal tax. Align drawings with your wider income. Many landlords keep cash in the company to fund refurbs and deposits, then take dividends in years when their personal income is lower. Keep an eye on rules for loans to participators and benefit-in-kind pitfalls if the company covers personal costs.
Moving existing properties into a company
Tax and mortgage implications of transfers
Moving a property you already own into a company is treated as a sale at market value. That can trigger capital gains tax for you and SDLT for the company. Your current lender must also agree to a change of borrower; in most cases, a refinance to a limited company product is required. Run the numbers carefully to ensure long-term benefits outweigh the upfront costs.
When incorporation relief may apply (partnerships)
If you operate as a genuine property business partnership, incorporation relief can sometimes defer capital gains when transferring into a company. The rules are strict and hinge on evidence of an actual partnership business. Get specialist tax advice and gather documentation—banking, accounts, and day-to-day activity—to support any claim.
Alternatives to a full transfer
If a full transfer is expensive, explore partial solutions: hold future purchases in a company while keeping existing low-geared properties personally; or restructure ownership shares to manage income between family members. A phased approach can strike a balance between simplicity now and flexibility later.
Who benefits and who doesn’t
Single-property basic-rate taxpayer
If you have one rental with modest gearing and you need the income, a company may add cost without yielding a net benefit. Personal ownership can remain efficient and simple.
Higher-rate or portfolio landlord
If you’re on higher-rate bands, plan to grow, and will reinvest profits, company ownership often improves cash flow thanks to interest deductibility and the ability to retain profits. The administrative load is higher, but the compounding effect of retained earnings can be powerful.
Joint owners with different tax bands
Couples with differing tax bands can use share classes to vary dividends. It gives more control over who receives income in a given year, but it needs thoughtful drafting and ongoing documentation. Keep minutes, dividend vouchers, and shareholder agreements neat and current.
Alternatives to consider before you decide
Personal ownership with targeted structuring
Sometimes the simplest path works best. Consider adjusting ownership shares or using declarations of trust to direct income where it’s most tax-efficient (seek advice to avoid unintended consequences). Simplicity reduces costs and keeps remortgages easy.
LLP with a company member
An LLP combined with a corporate member can give income-splitting flexibility and a route to corporate retention of profits. It’s more complex and requires disciplined accounts and partnership agreements. It is a specialist route—only adopt it with advice and a clear growth plan.
Holding company for larger portfolios
As portfolios grow, a holding company with property-owning subsidiaries can ring-fence risk between assets and simplify future sales or refinancing. That is a long-term architecture decision and should be modelled with your broker, accountant, and solicitor to ensure lending and tax line up.
Conclusion
Using a limited company for buy-to-let is neither a silver bullet nor a fad. It’s a well-established structure that helps UK landlords manage risk, retain profits for growth, and plan ownership across family members. The trade-off is extra admin, higher professional costs, and more rules to follow. If you expect to scale, carry some gearing, and can leave surplus cash in the business, the structure can enhance after-tax returns and make portfolio building smoother. If you need all the rental income now from a single, low-geared property, simplicity may win.
