Buy-to-Let Through a Company: Corporation Tax Guide
Holding buy-to-let property through a limited company has become increasingly popular since the Section 24 mortgage interest restriction hit personal landlords. But is a company structure right for you?
This guide explains how corporation tax applies to buy-to-let companies, the advantages and disadvantages, and what you need to know before committing.
Why Landlords Are Using Companies
Before April 2017, individual landlords could deduct their full mortgage interest from rental income. Section 24 changed everything.
Personal landlords now receive only a 20% tax credit for mortgage interest — meaning higher-rate taxpayers pay significantly more tax on the same rental profits.
Companies were not affected by Section 24. A limited company can still deduct 100% of mortgage interest as a business expense before calculating corporation tax.
The numbers
Consider a property generating £20,000 rent with £12,000 mortgage interest and £3,000 other expenses:
Personal (higher-rate taxpayer):
- Taxable income: £20,000 − £3,000 = £17,000
- Income tax at 40%: £6,800
- Less 20% mortgage interest credit: −£2,400
- Tax payable: £4,400
Through a company:
- Taxable profits: £20,000 − £12,000 − £3,000 = £5,000
- Corporation tax at 19% (small profits rate): £950
- Tax payable: £950
The difference is striking. But the company route has costs and complications that can erode this advantage.
How Corporation Tax Works for Property Companies
A buy-to-let company pays corporation tax on its taxable profits — rental income minus allowable deductions.
Allowable deductions
Your property company can deduct:
- Mortgage interest — the full amount, not restricted like personal ownership
- Letting agent fees and property management costs
- Insurance — buildings, contents, landlord liability
- Repairs and maintenance — like-for-like replacements, not improvements
- Accountancy fees and tax filing costs
- Legal fees related to tenancy agreements (not purchase costs)
- Travel expenses for property inspections and management
- Council tax and utilities — if paid by the company during void periods
- Ground rent and service charges
You cannot deduct the cost of purchasing the property itself, but you can claim capital allowances on qualifying fixtures within the property.
Corporation tax rates for 2025/26
Your company's profits determine the rate:
| Profit level | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 – £250,000 | 26.5% effective (marginal relief) |
| Over £250,000 | 25% (main rate) |
Most buy-to-let companies with a handful of properties will fall into the small profits rate of 19%.
Mortgage Interest: The Big Advantage
The single biggest tax advantage of holding buy-to-let property in a company is full mortgage interest deduction.
For personal landlords, Section 24 means:
- You add rental income to your other income
- This can push you into higher tax bands (40% or 45%)
- You only get a 20% tax credit on the interest
For a company:
- Mortgage interest is deducted in full before tax
- Corporation tax is charged on the net profit
- The rate is 19–25%, not 40–45%
This advantage grows with leverage. The more you borrow relative to the property value, the bigger the gap between personal and company taxation.
Important: Getting a mortgage through a company can be harder and more expensive. Lenders charge higher rates for limited company buy-to-let mortgages — typically 0.5–1.5% more than personal buy-to-let rates. Factor this into your calculations.
Extracting Profits: The Hidden Cost
Here's where many landlords get caught out. Corporation tax is only the first layer of taxation.
When you take money out of the company, you face a second tax charge:
Dividends
Most landlords extract profits as dividends:
- First £500 — tax-free (dividend allowance, 2025/26)
- Basic rate: 8.75%
- Higher rate: 33.75%
- Additional rate: 39.35%
Combined tax rate
When you factor in corporation tax plus dividend tax, the combined effective rates are:
| Taxpayer band | Company CT + dividend tax | Personal tax (pre-Section 24) |
|---|---|---|
| Basic rate | ~26% | 20% |
| Higher rate | ~46% | 40% |
| Additional rate | ~51% | 45% |
For basic-rate taxpayers who extract all profits, a company can actually be more expensive than personal ownership was before Section 24.
The company structure wins when:
- You're a higher-rate taxpayer
- You have significant mortgage interest
- You retain profits in the company rather than extracting them all
- You're building a portfolio and reinvesting
Retaining Profits: Where Companies Really Win
If you leave profits inside the company, you only pay corporation tax — no dividend tax.
This makes companies ideal for landlords who are:
- Reinvesting — using retained profits as deposits for additional properties
- Paying down mortgages — reducing debt faster by keeping more post-tax income
- Building long-term wealth — not needing the rental income for living expenses
A company retaining £50,000 of profit pays £9,500 in corporation tax (at 19%), leaving £40,500 to reinvest.
A higher-rate individual would pay around £16,500 in combined income tax and NIC, leaving only £33,500.
That £7,000 annual difference compounds significantly over a 20-year portfolio-building period.
Stamp Duty Land Tax (SDLT) Implications
Buying property through a company means paying the 3% additional SDLT surcharge that applies to second homes and company purchases.
For a £300,000 property:
| Element | Rate | Tax |
|---|---|---|
| First £250,000 | 3% (0% + 3% surcharge) | £7,500 |
| £250,001 – £300,000 | 8% (5% + 3% surcharge) | £4,000 |
| Total SDLT | £11,500 |
If this is your first property and you'd qualify for first-time buyer relief personally, the SDLT cost of buying through a company is substantially higher.
Transferring existing properties
Moving properties you already own personally into a company triggers:
- SDLT on the market value (including the 3% surcharge)
- Capital Gains Tax on any gain since you bought it
- Potential mortgage redemption if your lender won't transfer
These costs often make it uneconomical to transfer existing properties. The company structure typically works best for new purchases.
Filing Your CT600
Your property company must file a CT600 company tax return within 12 months of the end of each accounting period.
The return must include:
- Rental income and expenses
- Capital allowances claimed
- Any other income (bank interest, etc.)
- iXBRL accounts
Corporation tax is due 9 months and 1 day after the end of the accounting period.
For property companies with straightforward affairs, filing software like Taxpipe can handle the CT600 without needing an accountant. The key is keeping accurate records of all income and expenditure.
Capital Gains: Company vs Personal
When you sell a property, the tax treatment differs significantly:
Personal ownership:
- Capital Gains Tax at 18% (basic rate) or 24% (higher rate) on residential property
- Annual exempt amount of £3,000 (2025/26)
- Private residence relief if you ever lived there
Company ownership:
- Corporation tax on the gain (19–25%)
- No annual exempt amount
- No private residence relief
- But: you then pay tax again when extracting the proceeds as dividends
For a single property sold at a large gain, personal ownership can be cheaper. For a portfolio where proceeds are reinvested, the company structure may still win.
Practical Considerations
Accounting costs
A property company needs:
- Annual accounts prepared (even if simple)
- CT600 filed each year
- Confirmation statement filed at Companies House
- Potentially a personal tax return if you take dividends
Budget £500–£1,500 per year for compliance costs, depending on complexity. These are allowable expenses of the company.
Mortgage availability
Not all lenders offer company buy-to-let mortgages. Those that do typically require:
- A Special Purpose Vehicle (SPV) — a company whose sole purpose is holding property
- SIC code 68100 (buying and selling own real estate) or 68209 (other letting)
- Personal guarantees from directors
- Higher arrangement fees and interest rates
Insurance and liability
A limited company provides a degree of liability protection. If a tenant or visitor is injured and sues, they sue the company, not you personally (unless you've given personal guarantees).
However, this protection is limited — lenders almost always require personal guarantees for company mortgages.
When a Company Structure Makes Sense
A company is likely beneficial if:
✅ You're a higher-rate taxpayer (40%+) ✅ You have significant mortgage debt on the properties ✅ You plan to retain profits and grow the portfolio ✅ You're buying new properties (not transferring existing ones) ✅ You're building a portfolio for long-term wealth, not immediate income
A company is likely not worth it if:
❌ You're a basic-rate taxpayer with small mortgages ❌ You need to extract all rental income for living costs ❌ You already own properties personally and would need to transfer them ❌ You have just one property and the compliance costs outweigh the savings ❌ You want simplicity — companies add admin burden
Frequently Asked Questions
Further reading: See our complete corporation tax for property companies guide for more on running a property company, and the investment company tax guide if you hold a mixed portfolio.
Do I need a special type of company for buy-to-let?
Most lenders require a Special Purpose Vehicle (SPV) — a standard limited company with property-related SIC codes. You can set one up through Companies House for £12. Keep it separate from any trading company.
Can I claim capital allowances on a buy-to-let property?
You can claim capital allowances on qualifying fixtures within the property — things like heating systems, kitchens (fitted units), and bathroom suites. You cannot claim on the building structure itself. See our capital allowances guide for details.
What happens to my company properties when I die?
The properties are owned by the company, and your shares in the company pass through your estate. Shares can qualify for certain inheritance tax reliefs, but investment property companies generally don't qualify for Business Property Relief. Take professional advice on estate planning.
Can I use a company for holiday lets?
Yes, and Furnished Holiday Lets (FHLs) get additional tax advantages within a company, including eligibility for capital allowances on furniture and equipment, and potential Business Asset Disposal Relief on sale.
Is it too late to move my properties into a company?
It's not too late, but the transfer costs (SDLT, CGT, mortgage fees) may make it uneconomical. Run the numbers carefully — the break-even period could be 10+ years. For many landlords, it's better to keep existing properties personally and buy new ones through a company.
Do I need an accountant for a property company?
Not necessarily. If your property company has straightforward rental income and expenses, you can file the CT600 yourself using filing software. However, if you have multiple properties, complex financing, or development activity, an accountant is advisable.