Ltd Company vs Personal Name: Should You Incorporate?

Ten years ago, the question of whether to hold rental property personally or through a limited company was a fairly niche one, mostly relevant to landlords with very large portfolios. Today, it's one of the most common questions landlords ask, and for good reason. The introduction of Section 24, which removed the ability for individual landlords to deduct mortgage interest before calculating their tax bill, has changed the maths significantly for many people. Companies were never subject to that restriction, and that single difference has made incorporation a genuine, mainstream consideration rather than a specialist strategy. This guide walks through how each structure is taxed, what it actually costs to switch, and the kind of landlord each option tends to suit. It's general information, not advice on your specific situation, an accountant who knows your full circumstances is the right person to make that call.

Why this question matters so much more since Section 24

Before April 2020, an individual landlord and a company were taxed in a broadly similar way on rental profit: income came in, allowable costs (including mortgage interest) came off, and tax was paid on what was left. Section 24 changed that for individuals. Mortgage interest is no longer deducted from rental income before working out taxable profit. Instead, individual landlords get a flat-rate tax credit, currently 20% of the interest paid (rising to 22% from April 2027), deducted from their final bill. For a higher-rate taxpayer who would previously have had relief at 40%, that's a real gap, and for heavily-mortgaged portfolios it can be the difference between a healthy profit and a tax bill that swallows most of the cash profit. Companies were never brought into Section 24. They simply continue to deduct mortgage interest as a normal business expense. That one structural difference is why so many landlords, particularly higher-rate taxpayers with significant borrowing, now seriously weigh up incorporating.

How personal ownership is taxed

If you own rental property in your own name (or jointly with a partner), your rental profit is simply added to your other income for the year, salary, pension, self-employment profits, and so on, and taxed at your marginal rate. For 2026/27 that means the familiar income tax bands: 20% basic rate, 40% higher rate, and 45% additional rate, with the personal allowance of £12,570 tapering away once total income passes £100,000. From April 2027, separate and higher rates will apply specifically to property income: 22%, 42% and 47% in place of the current 20%, 40% and 45%. Mortgage interest, as covered above, isn't deducted from rental income before this calculation; instead you receive a flat-rate credit (20% now, 22% from April 2027) against your final bill. The practical effect is that personal ownership tends to suit landlords whose total income, including rental profit, sits comfortably within the basic-rate band, and those with little or no mortgage borrowing, since the Section 24 gap simply doesn't bite as hard for them.

How company ownership is taxed

A limited company that owns rental property pays corporation tax on its profits rather than income tax. For 2026/27 the rates are 19% on profits up to £50,000, a marginal relief band that tapers the rate upward between £50,000 and £250,000, and a flat 25% on profits above £250,000. Crucially, the company deducts mortgage interest in full as a normal business expense before arriving at that taxable profit, there's no Section 24 restriction at all. For many landlords with significant gearing, this single difference, full interest deductibility against a headline rate that starts at 19%, is the entire reason incorporation looks attractive on paper.

The catch is what happens next. Money sitting inside a company isn't yours personally, you have to extract it, typically as a combination of salary and dividends, and that extraction is taxed again. Each shareholder has a £500 dividend allowance, and dividend income above that is taxed at 8.75% (basic rate), 33.75% (higher rate) or 39.35% (additional rate), on top of whatever corporation tax the company has already paid on the underlying profit. In other words, company profits can be taxed twice before they reach your pocket: once at company level (corporation tax) and again at personal level when you draw them out (dividend tax).

The double taxation trade-off, and why it often still wins out

On the face of it, "taxed twice" sounds like an obvious reason to avoid incorporating. In practice, the comparison is more nuanced, and for many higher-rate taxpayers with substantial mortgage interest, the company route still comes out ahead. The reason is that the combined effect of full interest deductibility and a comparatively low headline corporation tax rate can outweigh the cost of a second layer of tax, especially if you don't need to extract every pound of profit each year. A landlord building a portfolio who can leave profits inside the company to fund the next purchase, rather than drawing them out and paying dividend tax immediately, effectively defers that second layer of tax, often for years. The position is much less clear-cut for a landlord who needs to draw out most or all of the rental profit as personal income each year; in that case, the second layer of tax arrives quickly and can erode much of the advantage. This is exactly the kind of calculation that benefits from running your own real figures rather than relying on rules of thumb, our Ltd Company vs Personal Calculator lets you compare the two routes side by side using your own income, expenses and portfolio size.

The cost and friction of incorporating an existing portfolio

For a landlord starting out, buying the first property through a company is relatively straightforward. For a landlord who already owns property personally, moving it into a company is a much bigger step, and one that comes with real costs that need to be weighed against any ongoing tax saving:

• Stamp Duty Land Tax on the transfer. Moving a property from your own name into a company you control is treated as a sale for SDLT purposes, charged at company and additional-property rates, including the 5% surcharge, with no first-time buyer relief available. On anything but a low-value property, this can run into many thousands of pounds. Our Stamp Duty Calculator can show you what that would look like at the relevant rates.
• Capital Gains Tax on the "disposal". HMRC treats the transfer as though you've sold the property at market value, even though no money changes hands in the usual sense. If the property has risen in value since you bought it, this can trigger a CGT bill on the gain, on top of the SDLT cost.
• Legal and accountancy costs. Setting up the company, transferring the title, redrafting mortgage arrangements and getting proper professional advice all cost money, indicatively this can run from a few hundred pounds for the simplest cases to several thousand for larger or more complex portfolios.
• Mortgage availability and cost. Limited company buy-to-let mortgages exist and the market has matured considerably, but the choice of lenders and products is still smaller than for personal buy-to-let mortgages, and rates or fees are sometimes a little higher. Existing personal mortgages will usually need to be repaid and replaced, which can mean early repayment charges too.

None of this means incorporating an existing portfolio is a bad idea, for some landlords the ongoing saving comfortably outweighs a one-off cost within a few years. But it does mean the decision needs a proper "break-even" calculation: how many years of extra saving does it take to recover the transfer costs, and does that timescale make sense for your plans?

Who tends to benefit most from incorporating

• Higher-rate (or additional-rate) taxpayers, where the gap between their income tax rate and the 20% (soon 22%) Section 24 credit is at its widest.
• Landlords with significant mortgage borrowing relative to their rental income, since that's where the loss of interest deductibility bites hardest personally.
• Landlords planning to grow a larger portfolio over time, who can reinvest profits inside the company rather than drawing them all out and paying a second layer of tax immediately.
• Those who don't need to live off the rental income now, and can afford to leave profit inside the company to compound.

Who tends to be better off staying personal

• Smaller portfolios, where the one-off cost of incorporating (SDLT, CGT, legal and accountancy fees) would take many years to recoup against a relatively modest annual saving.
• Basic-rate taxpayers, for whom the Section 24 credit broadly matches the rate of relief they'd otherwise get, so the personal route is already reasonably efficient.
• Landlords who need to draw most or all of the rental income out as personal income straight away, since that brings the second layer of company taxation forward and reduces the benefit of a lower headline corporation tax rate.
• Those who would rather avoid the extra admin that comes with running a company (see below), and who place a high value on simplicity.

Other things to weigh up beyond the numbers

The tax comparison is the headline issue, but it isn't the whole story. A limited company brings ongoing administrative responsibilities that an individual landlord simply doesn't have: preparing and filing statutory accounts, submitting confirmation statements and other filings to Companies House, completing corporation tax returns, and generally keeping the company's affairs in good order. For some landlords this is a minor inconvenience handled by an accountant for a modest annual fee; for others, particularly those who value simplicity or are managing things themselves, it's a meaningful extra burden. Mortgage availability, as mentioned above, is also worth factoring in carefully, the range of limited company buy-to-let products has grown but remains narrower than the personal market, and your existing lender relationships may not transfer across.

Taken together, this is genuinely a complex decision that depends on your income, your gearing, your plans for the portfolio, your appetite for admin, and your personal circumstances more broadly. A property tax accountant who can look at your full picture, not just the rental side, is far better placed to give you a recommendation than any general guide or calculator. What a calculator can do is give you a clear, like-for-like comparison of the numbers as they stand today, which is a useful starting point for that conversation.