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Personal vs Limited Company
Should you hold property personally or through an SPV (Special Purpose Vehicle)? Compare the tax implications side by side.
Property Details
Your Tax Position
Used to compute your marginal tax band and Section 24 credit
Divides the CT thresholds (0 for a standalone SPV)
Personal Ownership
Section 24 applies — marginal tax on property income
Limited Company (SPV)
Mortgage interest deductible · CT at 19.0%
A limited company could save you £1,236 per year on this property
Consider consulting an accountant about setting up an SPV — savings compound significantly across a portfolio
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Frequently Asked Questions
Should I buy investment property personally or through a limited company?
For higher-rate (40%) and additional-rate (45%) taxpayers buying new properties, a limited company (SPV) is usually more tax-efficient because mortgage interest is fully deductible and corporation tax is lower than personal income tax. For basic-rate taxpayers with one or two properties, the extra accountancy costs often outweigh the tax saving.
What is Section 24 and why does it affect personal landlords?
Section 24 removed the right for individual landlords to deduct mortgage interest from rental income before calculating tax. Instead, a 20% basic rate credit applies. Higher-rate taxpayers pay 40% on the full rental profit (before interest) and only receive a 20% credit — meaning Section 24 can nearly double their effective tax rate.
Can I transfer my existing buy-to-let properties into a limited company?
Yes, but it is expensive. Transferring triggers SDLT at the 5% additional property surcharge on market value, and Capital Gains Tax on any gains since purchase. These costs typically make it uneconomical to transfer existing properties. A company structure is most advantageous when buying new properties from scratch.
What are the extra costs of running a property SPV?
Additional costs include accountancy fees (£500-£2,000 per year), Companies House annual confirmation statement (£34), corporation tax filing, and potentially higher mortgage rates with fewer lender options for limited company BTL. Directors may also need to take personal guarantees on company mortgages.
What tax do I pay when taking money out of a property SPV?
Profit retained in the company is taxed at corporation tax rates (19% for profits up to £50,000, tapering to 25% above £250,000 — limits divided by associated companies). When you extract the profit, additional personal tax applies: dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate) above the £500 annual dividend allowance.
What is marginal relief for corporation tax?
For profits between £50,000 and £250,000 (in a standalone company with no associated companies), corporation tax applies at an effective rate between 19% and 25% using a marginal relief formula. If your SPV has associated group companies, these limits are divided equally among all companies — reducing the range in which marginal relief applies.
Disclaimer: This content is for educational purposes only and does not constitute tax advice. Tax rules are complex, change frequently, and depend on individual circumstances. Always consult a qualified accountant or tax advisor (ACCA, ICAEW, or CIOT qualified) before making tax-related decisions.
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Personal Name vs Limited Company — The Tax Difference Explained
Since Section 24 removed mortgage interest relief for individual landlords, buying through a Special Purpose Vehicle (SPV) limited company has become significantly more tax-efficient for higher-rate taxpayers. A company pays corporation tax on net profit and deducts mortgage interest in full — an individual higher-rate taxpayer pays 40% on gross rental income with only a 20% credit on mortgage interest.
The tax saving can be substantial. A landlord with £50,000 rental income and £20,000 mortgage interest saves over £6,000/year via a company structure. But it's not free — setup costs, accountancy, and tax implications of transferring existing properties all need factoring in.
Corporation Tax — Three Tiers
Corporation tax is not a flat 25%. Standalone companies with profits up to £50,000 pay 19%. Profits between £50,000 and £250,000 attract marginal relief — an effective rate between 19% and 25%. Profits above £250,000 pay the full 25%. If your SPV has associated group companies, these limits are divided equally among all companies, which can push a profitable SPV into the 25% band sooner.
When Does a Limited Company Make Sense?
A company structure typically makes sense if: you're a higher or additional-rate taxpayer, you're buying new properties (not transferring existing ones), you intend to retain profit within the company, and you're building a portfolio of 5+ properties long-term. For basic-rate taxpayers with 1–2 properties, admin costs often outweigh the tax benefit.
Always Get Professional Advice
This decision depends heavily on your individual tax position, existing portfolio, income sources, and long-term goals. This calculator illustrates the structural difference — but consult a property-specialist accountant before acting. The cost of advice (£200–£500) is trivial compared to the potential tax implications of the wrong structure.