Compares holding rental property personally against through a company, with the finance-cost restriction, corporation tax and the cost of getting the money back out all counted.
On the figures so far
A company leaves £2,928 more a year — but the profit stays in the company.
The gap is £2,928 — wide enough to be real, and 2 figures were assumed. To be surer: the stamp duty and capital gains tax on moving an existing property into a company, which are usually the largest numbers in this decision and are not modelled here.
Refine it in 7 questions below.
The decision
A company leaves £2,928 more a year — but the profit stays in the company.
£2,928 better than held personally, on the same figures.
Each of these has to be true. Where your answers settle it we have said so; where they cannot, the test is yours to check.
You have, or are willing to have, a mortgage on the property. — met, on your answers
Not a rule — where the advantage comes from
You pay tax above the basic rate on the rental profit. — met, on your answers
ITTOIA 2005 s. 272A
You are buying, not moving an existing property. — we cannot tell from your answers
TCGA 1992 s. 17; FA 2003 Sch. 4ZA
You do not need the rental profit as income each year. — met, on your answers
Not a rule — where the advantage goes
You can get a company buy-to-let mortgage on acceptable terms. — we cannot tell from your answers
Not a rule — the commercial gate
This is information, not tax or financial advice. It shows how the rules apply to the figures you entered — it does not know the rest of your circumstances. Worth checking with an accountant before you act.
Rates as at 6 April 2026 — the 2026/27 tax year.
The figures above are only as good as what sits behind them. These are the records HMRC would ask for.
| When | What | If you miss it |
|---|---|---|
| 9 months and 1 day after the company year end | Pay corporation tax. | Interest from that date. |
| 12 months after the company year end | File the company tax return. | Penalties from £100, escalating. |
| 31 January after the tax year | Report rental profit personally, and any dividends taken from the company. | Interest and penalties. |
| 14 days after completion | File the stamp duty return on a transfer into a company. | Penalties and interest, on a charge that is already at the higher rates. |
| 60 days after completion | Report and pay capital gains tax on transferring UK residential property into a company. | Penalties from day 61, separate from the tax return. |
Personally, mortgage interest is not deductible: you are taxed on rent less running costs, and given a credit worth 20% of the interest. For a higher-rate taxpayer that is a 20-point shortfall on every pound of interest.
www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out
Accounts and filing, a company mortgage at a higher rate, and the cost of getting money out. Compare against the saving, not against the headline corporation tax rate.
Capital gains tax on the deemed disposal and stamp duty at the higher rates. This is usually the number that decides it, and it is a one-off cost against an annual saving.
www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property
It can defer the gain where the letting is genuinely a business rather than an investment. It is a question of fact, HMRC contests it, and it does not help with stamp duty.
www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65700
This is one of the few decisions on this site where the professional fee is reliably smaller than the cost of getting it wrong.
Three situations, worked through. They use the same rules as the tool above, so you can check the arithmetic against a case near your own.
The company deducts the interest in full, which is the entire difference. Retained, the profit bears one layer of tax instead of the restricted personal charge.
Still ahead, but by far less — and the gap narrows further once company running costs and a more expensive mortgage are counted.
Twenty-seven years to recover the transfer cost. For an existing property the answer is almost always no — the advantage is for what you buy next.
Every figure above comes from one of these. Where we have interpreted rather than calculated, the tool says so.
Finance costs on residential property are not deductible for individuals; relief is a basic-rate tax reduction instead.
The tax reduction is 20% of the lower of finance costs, property profits, and income above the personal allowance.
Companies deduct finance costs in full against property profits.
A transfer to a company you control is a disposal at market value for capital gains tax.
Companies pay the higher rates of stamp duty on residential property, with no first-property exemption.
Incorporation relief can defer the gain where the business transferred is a going concern.
Usually not. The transfer is a disposal at market value, so capital gains tax and higher-rate stamp duty both fall due, and those one-off costs commonly take decades of annual saving to recover. The company question is about what you buy next.
Since 2020, individuals cannot deduct mortgage interest from rental income. Instead they are taxed on the profit before interest and given a credit worth 20% of it. A higher-rate landlord therefore pays tax on money the lender has already taken.
On the profit, usually yes — corporation tax is lower than higher-rate income tax and the interest is deductible. But getting the money out costs dividend tax, and a company mortgage costs more. The advantage is real for accumulation and thin for income.
Shares in a property company are not business property for inheritance tax — an investment business does not qualify for Business Property Relief. A company can make gradual gifting easier, but it is not an inheritance tax shelter.
There is a well-established company buy-to-let market, but rates are typically 0.5 to 1 point higher and lenders normally want personal guarantees. That extra interest is a real annual cost and often swallows the tax saving.
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