Setting up a buy-to-let limited company – a guide for landlords

What is a property company for buy-to-let?

As a landlord, you can buy properties as an individual and pay income tax, or you can buy them through a limited company and pay corporation tax.

Setting up a company for your buy-to-let portfolio is known as incorporation.

Landlords who own their properties through limited companies also receive their rental income differently as it belongs to the company. This means you can either pay yourself a salary from the company or take your rental income as dividends.

There’s extra admin involved in setting up a buy-to-let limited company, such as: 

• keeping your accounts up to date
• registering with Companies House 
• registering with PAYE (if you want to pay yourself a salary) 

What are the pros and cons of setting up a buy-to-let company?

There are tax benefits to owning a limited company to rent out your properties, although it can be more complicated and time-consuming.

It’s important to weigh up the pros and cons and work out which ownership structure is best for you.

Benefits of incorporation

• owning through a limited company allows you to pay corporation tax, which is usually lower than individual income tax rates
• transferring a property between companies could mean you don’t need to pay stamp duty, inheritance tax, or capital gains tax, which could save you money
• restrictions on buy-to-let mortgage interest tax relief don’t apply to limited companies
• you may benefit from greater legal protection due to ‘limited liability’, which means if something goes wrong you’re only liable for the money you put in when the company was incorporated

Downsides of incorporation

• there are more responsibilities for landlords with limited companies, such as filing accounts and returns
• it can be harder to get a limited company buy-to-let mortgage, although the number of products has increased in recent years
• there are costs for switching to a limited company, and you’ll have to pay income tax if you take profits out of the company
• you’re likely to need specialist advice from a broker or accountant, which could cost you more and make the process longer

How to set up a buy-to-let limited company in 5 steps

Setting up a property company can be quick and easy, but it’s important to be aware of all the responsibilities and costs.

Read more: Certificate of Incorporation: registering with Companies House

Corporation tax rates versus individual tax rates

Corporate ownership	Individual ownership
19% on annual profits of under £50,000	20% on earnings between £12,571 and £50,270
Between 19% and 25% on profits between £50,000 and £250,000	40% on earnings between £50,271 and £125,140
25% on profits over 250,000	45% on earnings over £125,141

Landlords who own their properties personally will pay 20 per cent tax on buy-to-let income between £12,571 and £50,270, with a higher rate of 40 per cent for income between £50,271 to £125,140. There’s an additional rate of 45 per cent of income over £125,141.

The main corporation tax rate is 19 per cent on annual profits of £50,000 or less. The top rate of corporation tax (on profits over £250,000) is 25 per cent. If your profits are between £50,000 and £250,000, you pay an effective corporation tax rate of between 19 per cent and 25 per cent.

Our guides to corporation tax and rental income tax return for landlords cover everything you need to know depending on which type of ownership you have.

Why are more landlords transferring their properties to a limited company?

The reason why many landlords have chosen to incorporate their portfolios is due to Section 24 tax changes, which started in April 2017.

Before April 2017, you could deduct 100 per cent of mortgage interest from rental income, leaving many landlords with a favourable income tax bill.

However, the government gradually phased out buy-to-let mortgage tax relief, replacing it with a 20 per cent tax credit in April 2020.

This means landlords paying income tax can no longer deduct costs from their tax bill and only receive 20 per cent of their mortgage interest cost back.

How tax changes have impacted landlords’ finances

Analysis by estate agency Hamptons shows that a higher rate tax paying landlord would have paid a tax bill of £2,400 in 2015.

This is based on receiving rent of £1,000 a month, while paying £500 a month in buy-to-let mortgage interest.

By 2020, this landlord’s tax bill would have increased to £3,600. This is because they paid 40 per cent tax on their £12,000 income, receiving a 20 per cent tax credit of just £1,200. Before the tax changes, they were able to deduct their £6,000 in buy-to-let mortgage interest as an expense.

It’s important to note that as buy-to-let mortgage interest rates have increased since 2022, many landlords’ tax bills are likely to be even higher.

Buy-to-let tax relief for landlords

If you run your portfolio through a limited company, the main tax relief is that you can claim mortgage interest as a business expense.

Whether this saves you a significant amount of money depends on your circumstances. However, if you’re a higher or additional rate taxpayer, limited company ownership is likely to lower your tax bill.

Limited company landlords can also benefit from inheritance tax relief if you’re planning on handing your property down to family in the future.

Capital gains tax for limited company landlords

Landlords who sell a property they own personally will have to pay capital gains tax (CGT) above the current allowance of £3,000.

However, if you own your property through a limited company, you won’t have to pay CGT. But you will need to pay corporation tax, as it’ll be considered ‘taking profit’ out of your business.

Whether it’s cheaper to pay CGT (and benefit from the tax-free allowance) or corporation tax depends on how much profit you expect to make from selling your property.

Our guide to capital gains tax gives further information on how much you’d have to pay if you sold one of your properties as an individual.

Should you set up a limited company to buy property?

It can be costly to incorporate and sell your buy-to-let property to a limited company. There’s also the extra administration work to consider, and the potential cost of hiring an accountant.

However, due to Section 24 tax changes, there could be long-term benefits to setting up a limited company for your portfolio – particularly if you pay higher rate tax and own several properties.

Incorporating can give you more flexibility when it comes to your tax return and selling property.

Whether you decide to start a rental property business will depend on your financial circumstances and future plans.

Before you make any decision, make sure you speak to a financial expert and do your research.

Do you own your properties through a limited company? Let us know in the comments below.

More guides for buy-to-let landlords

• What is buy-to-let investment? A guide to buying and selling property
• Renting out your property: rules for landlords in 2025
• How can landlords get a buy-to-let remortgage?
• Why do I need landlord insurance?