By Jorden Abbs, Chief Executive, Commercial Trust
Around three-quarters of new purchases are now made through a limited company, yet most landlords still own their property in their own name, and a great many who could reduce their tax burden by incorporating their property or portfolio into a limited company choose not to, once the full cost is clear.
The decision is rarely inertia and far more often a clear-eyed judgement about cost, circumstance, and what the move would buy them. So, the question to ask is not what everyone else is doing, but whether a limited company would genuinely leave you better off.
The pull towards a company is real, and for the right landlord it is hard to argue with. Since 2020, those who own in their own name have been able to claim only a basic-rate tax credit on their mortgage interest, whereas a company can still deduct that interest in full before it is taxed, and pays corporation tax of between 19 and 25 per cent rather than income tax that can reach 45 per cent. If you are a higher-rate taxpayer with a mortgaged portfolio you intend to hold and grow, that gap is hard to ignore, and with frozen allowances pulling more people into the higher band each year, the case only strengthens.
Set against that is the cost of getting there, which catches many landlords out. Moving an existing property into a company is treated as a sale and purchase, so it can trigger a capital gains charge on the way out and a stamp duty bill on the way in, the latter now carrying a surcharge of five per cent. For anyone sitting on years of price growth, that can run to tens of thousands of pounds before a single tax saving appears, which is reason enough for many to leave well-established holdings exactly where they are.
For a good number of landlords, the company advantage is small, or simply absent. A lower-rate taxpayer who earns little beyond their rents feels the interest restriction far less keenly, a landlord with little or no borrowing has almost no interest to relieve and so little to gain, and anyone close to selling or to retirement would only crystallise a tax bill by moving. In each case, staying personal is not the lazy option but the sensible one.
Personal ownership also carries its own quiet advantages. There are no company accounts to file, no corporation tax return, and no second tax point when you take money out, since the profit and the eventual sale proceeds are yours directly rather than reached through dividends or salary. You keep your personal allowance for capital gains on a sale, the choice of lenders tends to be wider with more straightforward underwriting, and for a smaller landlord the saving in time and accountancy can comfortably outweigh a modest tax gain that a company might deliver.
None of this makes personal ownership the right home for every portfolio, and it is worth being honest about the drawbacks. The same restriction that barely touches a basic-rate landlord can leave a higher earner taxed on rent rather than true profit, and as rates and thresholds move against them that position tends to worsen rather than improve.
Reinvesting profit to buy the next property is harder once it has been taxed as income, and change is already locked in rather than merely mooted: from April 2027, property income will be taxed at its own, higher rates – 22, 42 and 47 per cent rather than the standard 20, 40 and 45 – so a structure that feels comfortable today will feel tighter within two years.
In practice, few landlords treat this as a straight choice between one structure and the other. Many settle on a mix, keeping older or low-debt holdings in their own name where the gains are large and the saving small, while buying new property through a company where the numbers clearly favour it. The properties carrying the biggest unrealised gains are often precisely the ones best left alone, since moving them would hand over tax that need never have been paid.
What we are seeing across our lending is that the right answer is rarely about which structure is more cost effective, but about the personal fit – their income, the size and age of their portfolio, their borrowing, and how long they plan to hold. Incorporation may be the trend, but landlords who choose to stay personal are usually making a strong decision for their circumstances, and the only real mistake is to follow the crowd without first running your own numbers and taking proper tax advice. The landlords who get this right tend to be the ones who ask the question early, run the numbers properly, and take professional tax advice before they commit.
ENDS
