Pros And Cons Of Buying Property In A Limited Company (2026 Rules)

The decision between personal and limited company ownership ultimately comes down to tax efficiency, financing options, and your long-term investment strategy. Neither approach is universally better—what matters is which structure suits your specific situation.

The table below summarises the key advantages and disadvantages of limited company ownership for UK property investors in 2026:

For a basic rate taxpayer with one or two low-geared properties, limited companies pay additional costs and involve extra admin that may outweigh the tax benefits. The greater tax savings typically materialise for larger, more leveraged portfolios.

Tax Treatment: Personal vs Company Ownership

Tax is usually the main driver when clients ask us whether to purchase property in their own name or through a company. Understanding how rental profits, mortgage interest, and eventual sale proceeds are taxed under each structure is essential before you commit.

All figures in this section reflect the 2025/26 UK tax year. Tax rates and thresholds are subject to government change, so always confirm current rates with your accountant.

Personal ownership: When you own property personally, your rental income is added to your other personal income and taxed at your marginal income tax band—20% for basic rate, 40% for higher rate, or 45% for additional rate taxpayers (the basic rate tax band determines the rate of capital gains tax and income tax for individuals). As an individual landlord, you must pay income tax on your rental profits, and national insurance contributions may also apply in certain circumstances. Since the Section 24 changes, you cannot deduct mortgage interest from your rental profits. Instead, you receive a tax credit equal to 20% of your mortgage interest payments, regardless of your income tax band.

When you sell, you pay capital gains tax on any profit above your capital gains tax allowance (£3,000 for 2025/26). Residential property gains are taxed at 18% for basic rate taxpayers and 24% for higher rate taxpayers.

Company ownership: Limited companies pay corporation tax on rental profits. Property income earned by the company can be left within the company for reinvestment or extracted as dividends, each with different tax implications. The current rates are 19% for profits up to £50,000 (small profits rate), marginal relief between £50,000 and £250,000, and 25% for profits above £250,000. Crucially, companies can deduct mortgage interest in full as a legitimate business expense—there is no Section 24 restriction.

When the company sells a property, any gain forms part of its taxable profits and is subject to corporation tax, not personal CGT. However, extracting the proceeds to shareholders triggers further taxation—typically dividend tax at 8.75%, 33.75%, or 39.35% depending on your income tax band, after the tax free dividend allowance.

Mortgage Interest And Section 24

The Section 24 finance cost restriction remains one of the most significant factors pushing landlords towards company structures. Since these rules fully phased in, individual landlords can no longer deduct mortgage interest payments from their rental income before calculating tax. Instead, they receive a basic rate tax credit (20%) on their interest costs.

For higher income tax rates, this creates a substantial tax burden. Consider a landlord with multiple mortgaged investment properties paying £15,000 in annual mortgage interest:

Capital Gains And Exit Strategy

Before buying in a company name, consider how you plan to exit. Selling properties or passing them to family works differently depending on ownership structure, and the tax implications can be substantial.

Personal ownership: Individuals benefit from the annual capital gains tax allowance (£3,000 for 2025/26). Residential property gains above this threshold are taxed at 18% (basic rate) or 24% (higher rate). If you sell multiple properties over several years, you can use multiple years’ allowances, potentially saving significant tax.

Company ownership: Limited companies do not receive a personal CGT allowance. When the company sells a residential rental property, the entire gain is taxed as part of corporation profits at 19-25%. Additionally, when shareholders extract the sale proceeds, they pay dividend tax on top—creating a double layer of taxation.

Example: A £150,000 gain on a rental property:

• Personal (basic rate taxpayer): £150,000 – £3,000 allowance = £147,000 × 18% = £26,460 CGT
• Company route: £150,000 × 19% = £28,500 corporation tax, plus extraction via dividend (assuming higher rate): roughly £24,400 additional tax on extraction, totalling approximately £52,900

This illustrates why personal ownership may suit investors planning to sell in the short to medium term. Company structures work best when profits are reinvested rather than extracted.

Some commercial scenarios allow selling company shares rather than the property itself, potentially with different tax treatment. However, this is niche, requires specialist legal and tax advice, and rarely applies to standard residential buy to let properties.

Inheritance Tax And Family Planning

Many clients here at Fox Davidson are motivated by long-term family wealth planning as much as annual tax efficiency. How property ownership affects inheritance tax payable is a crucial consideration.

When you own property personally, its value falls into your estate on death. Inheritance tax applies at 40% above your available nil-rate bands (currently £325,000 plus up to £175,000 residence nil-rate band for qualifying estates). With UK residential property values often exceeding these thresholds, inheritance tax relief becomes a significant concern for property investors.

Company shares can sometimes assist with succession planning. You might gift shares gradually over time, use different share classes to separate control from value, or structure ownership to benefit from taper relief. However, Business Relief (which can exempt qualifying business assets from IHT) typically does not apply to pure passive property letting—your property business accrues value, but this usually remains within your estate.

We must stress that inheritance tax planning is complex and must be led by a qualified tax adviser. As brokers, our focus is ensuring the chosen financing structure matches your medium- and long-term plans. If inheritance tax is a primary concern, discuss this with your solicitor and accountant before committing to any ownership structure.

Practical Steps To Buy Property In A Company Name

If you have decided that limited company ownership suits your situation, here is a step-by-step guide to purchasing a UK buy to let, HMO, or similar investment property in 2026.

Realistic timings for the UK: company setup takes just a few days, mortgage approvals typically run 4–8 weeks, and conveyancing for a straightforward freehold often takes 12–16 weeks from offer acceptance to completion.

Here at Fox Davidson, we assist from the financing side, working alongside your solicitor and accountant to streamline the process. This is particularly valuable for time-sensitive purchases where coordination between parties is essential.

The process typically flows: set up SPV → open business bank account → obtain mortgage decision in principle → offer accepted → valuation → legal work → completion → registration.

Note: This section covers residential investment (buy to let properties, small HMOs, MUFBs). Trading premises and development schemes follow similar structures but require more complex lending products.

1. Set Up A Property SPV Limited Company

An SPV (Special Purpose Vehicle) is a company created with no trading activity other than holding and letting property. Most buy to let lenders specifically require this structure, rejecting applications from trading companies with mixed activities.

Your company must be registered with Companies House. You will need at least one director, a registered office address (this can be your home or an accountant’s address), and correctly chosen SIC codes. For property investment, the relevant codes include:

• 68100: Buying and selling of own real estate
• 68209: Other letting and operating of own or leased real estate
• 68320: Management of real estate on a fee or contract basis

Many landlords set up their SPV before viewing properties so mortgage applications are not delayed at offer stage. Formation costs are minimal—typically £12-£50 through Companies House directly, or £50-£150 through a formation agent who handles paperwork.

Shareholding can be structured to reflect your plans. Spouses might hold 50% each, or you might include adult children as minority shareholders for succession purposes. However, shareholding has tax implications, so take advice before finalising your structure.

2. Open A Business Bank Account

Mixing personal and company money creates tax complications and accounting headaches. Your SPV needs its own UK business bank account from day one.

All rent, mortgage payments, repairs, insurance, and professional fees should flow through this single, auditable account. This separation is essential for:

• Proving source of deposit funds to lenders
• Maintaining limited liability protection (commingling funds risks “piercing the corporate veil”)
• Preparing accurate annual accounts
• Submitting correct corporation tax returns

Most lenders will require sight of your company bank details before completion. Opening a business account typically takes 1-2 weeks, so factor this into your timeline.

3. Arrange Company Buy-To-Let Or Commercial Finance

Mortgages for limited companies differ significantly from personal buy to let mortgages. Product ranges are narrower, underwriting focuses on both the company and its directors, and rates are typically slightly higher.

Typical deposit requirements in 2026:

Here at Fox Davidson, as a whole-of-market broker, we compare specialist limited company lenders, stress-test rental coverage calculations, and advise whether bridging finance, term buy to let, or a development facility best suits your needs.

4. Make An Offer And Go Through Conveyancing

Your offer, memorandum of sale, and sale contract will all name the limited company as the buyer. As director, you sign on behalf of the company, not in your personal capacity.

Appoint a solicitor or licensed conveyancer experienced in limited company and buy to let work. They will handle:

• Lender requirements and mortgage conditions
• Companies House checks and searches
• Board minutes authorising the property purchase
• Standard conveyancing searches (local authority, environmental, drainage)
• Reviewing any existing tenancy agreements if buying with tenants in situ

Typical UK timelines in 2026: from offer accepted to completion usually takes 12-20 weeks. Leasehold flats, complex titles, or properties with issues can take longer.

5. Completion, Registration And Ongoing Compliance

On completion day, the lender releases funds to your solicitor, the seller receives payment, and keys are released. Legally, the property becomes an asset of your limited company.

Your solicitor applies to HM Land Registry to register the company as proprietor and to register the lender’s legal charge. Registration can take several weeks in England and Wales, but ownership is effective from completion date.

Ongoing compliance duties:

• File annual accounts at Companies House (due 9 months after year-end)
• Submit Confirmation Statement annually to Companies House (£13 fee)
• Prepare corporation tax bill returns and pay corporation tax (due 9 months and 1 day after year-end)
• Directors receiving income must submit personal Self Assessment returns
• Maintain adequate buildings and landlord insurance as required by lender covenants
• Keep accurate records of all income, expenses, and capital transactions

Most landlords work with an accountant familiar with property SPVs to ensure records, tax returns, and annual accounts are accurate and timely.

Stamp Duty, ATED And Other Extra Costs

Buying in a company name increases both upfront and ongoing costs. Understanding these is essential when calculating whether company ownership delivers substantial tax savings overall.

Stamp Duty Land Tax (SDLT) for companies in 2025/26:

Companies buying residential property in England and Northern Ireland always pay the 3% additional dwelling surcharge, even on the company’s first purchase. For property above £500,000, higher rates apply to “corporate envelope” purchases (designed to discourage overseas companies holding UK residential property).

Annual Tax on Enveloped Dwellings (ATED):

Companies buy residential property above certain thresholds must pay ATED annually. For 2025/26, properties valued above £500,000 held by companies are subject to annual charges:

Setup and running costs should also be factored in: accountancy fees (typically £500-£1,500 annually for a simple SPV), Companies House filing fees, and specialist tax advice when needed.

Limited Company Mortgages, HMOs And Portfolio Landlords

In 2026, a significant share of new UK buy to let lending goes to limited companies, particularly for HMOs, MUFBs, and professional portfolio landlords with four or more mortgaged properties.

Lenders typically differentiate between property types, each with specific criteria and stress tests:

Here at Fox Davidson, we source specialist finance for company-owned HMOs, student lets in university towns like Bristol, Manchester, Leeds, and Nottingham, and mixed-use buildings where commercial space sits below residential units.