Limited Company vs Personal Ownership: Which Costs You Less in 2026?

The question of whether to hold rental properties personally or through a limited company has become one of the most debated topics in UK landlord circles. And for good reason: the tax treatment of the two structures is now dramatically different, and the gap is widening.

Here's an honest comparison of where things stand in 2026.

What Changed and Why It Matters

Before 2017, landlords holding properties personally could deduct their full mortgage interest from rental income before calculating their tax bill. A higher-rate taxpayer with £20,000 of rental income and £15,000 of mortgage interest paid tax on £5,000.

Section 24 of the Finance Act 2015 changed all of that. Phased in between 2017 and 2020, it replaced the mortgage interest deduction with a 20% tax credit. The result: higher-rate and additional-rate taxpayers now pay significantly more tax on the same rental income.

The Personal Ownership Tax Position in 2026

If you hold properties personally:

- Rental income is added to your other income and taxed at your marginal rate (20%, 40% or 45%)

- You receive a 20% tax credit on mortgage interest — not a deduction

- For a 40% taxpayer, this means you effectively pay 20% tax on your mortgage interest (you get 20% credit but pay 40% tax on the gross income)

- For a 45% taxpayer, the effective tax on mortgage interest is 25%

Example (40% taxpayer):

- Rental income: £20,000

- Mortgage interest: £10,000

- Tax on £20,000 at 40% = £8,000

- Less 20% credit on £10,000 = £2,000

- Net tax: £6,000

- Effective tax rate on actual profit (£10,000): 60%

The Limited Company Tax Position in 2026

If you hold properties through a limited company:

- The company pays Corporation Tax on profits (25% for profits over £50,000; 19% for profits under £50,000 — the small profits rate)

- Mortgage interest is fully deductible as a business expense

- You extract profits as salary (tax-deductible for the company) and/or dividends

- Dividends are taxed at 8.75% (basic rate), 33.75% (higher rate) or 39.35% (additional rate) above the £500 dividend allowance

Example (same figures, limited company):

- Rental income: £20,000

- Mortgage interest: £10,000

- Company profit: £10,000

- Corporation Tax at 19%: £1,900

- Net profit after tax: £8,100

- If extracted as dividends (higher rate): additional 33.75% on £8,100 = £2,734

- Total tax: £4,634

Compared to £6,000 personally — a saving of £1,366 per year on this example. The saving grows significantly with more properties and higher mortgage interest.

The Costs of Transferring Existing Properties

Here's the catch that stops many landlords from switching: transferring properties you already own personally into a limited company is not free.

Stamp Duty Land Tax (SDLT)

The company is treated as a new buyer. It pays SDLT on the market value of each property, including the 3% surcharge for additional dwellings. On a £300,000 property, SDLT could be £14,000 or more.

Capital Gains Tax (CGT)

The transfer is treated as a disposal at market value. If the property has increased in value since you bought it, you pay CGT on the gain. At 24% (higher rate, 2026), a £100,000 gain costs £24,000 in CGT.

Legal and professional fees

Conveyancing, accountancy advice, company formation — budget £2,000–£5,000 per property.

For most landlords with existing portfolios, the transfer costs make switching uneconomical unless they have a very large portfolio or very high mortgage interest costs.

Who Benefits Most from a Limited Company Structure?

A limited company structure tends to make most sense if:

- You are a higher-rate or additional-rate taxpayer

- You have significant mortgage debt (high interest costs)

- You are buying new properties (no transfer costs)

- You intend to reinvest profits rather than extract them immediately

- You have a long-term investment horizon (the tax savings compound over time)

It tends to make less sense if:

- You are a basic-rate taxpayer (the Section 24 impact is minimal)

- You own properties outright with no mortgage

- You need to extract most of the rental income to live on (dividend tax erodes the saving)

- You have a small portfolio (the additional admin costs may outweigh the tax saving)

The Additional Costs of Operating Through a Company

A limited company comes with ongoing costs that personal ownership doesn't:

- Annual accounts preparation (£500–£1,500 per year)

- Corporation Tax return filing

- Confirmation statement (£13 per year)

- Potential need for a business bank account (higher fees than personal accounts)

- More complex mortgage market — fewer lenders, typically higher rates

The Mortgage Rate Differential

Buy-to-let mortgages for limited companies typically carry higher interest rates than personal mortgages — often 0.2–0.5% higher. This partially offsets the tax saving. Factor this into your calculations.

What Most Landlords Are Actually Doing

The trend is clear: new purchases are increasingly being made through limited companies. According to UK Finance data, the proportion of buy-to-let mortgage applications from limited companies has risen from under 10% in 2016 to over 50% in 2025.

For existing portfolios, most landlords are holding personal properties and using the company structure for new acquisitions only — avoiding the transfer costs while benefiting from the better tax treatment going forward.

Getting the Decision Right

This is not a decision to make based on a general article. The right answer depends on your specific income, mortgage position, portfolio size, extraction needs and long-term plans. Get a qualified accountant who specialises in property tax to model both scenarios for your exact circumstances before making any decisions.

⚠️ Important Disclaimer

Tax rates, thresholds and rules change. This article reflects the position as at July 2026. Always verify current rates with HMRC or a qualified accountant before making decisions. This is general guidance only and does not constitute tax advice.