Limited Company Buy-to-Let: Is It Still Worth It in 2026?
Published: June 2026 | Reading time: ~10 minutes
Around 80% of new buy-to-let purchases in the UK are now made through limited companies. That shift — driven largely by Section 24 mortgage interest restrictions — has been one of the most significant structural changes to the landlord market in a generation.
But with corporation tax at up to 25%, dividend tax rates rising from April 2026, and limited company mortgages still carrying a rate premium over personal name products, the case isn't as simple as "always use a company." This guide gives you an honest look at when it works, when it doesn't, and what the numbers actually look like in 2026.
What Is a Limited Company BTL, and What Is an SPV?
When landlords talk about "buying through a company," they almost always mean an SPV — a Special Purpose Vehicle. This is a limited company set up for the sole purpose of holding and managing investment property, with no other trading activity.
Lenders strongly prefer SPVs over trading companies because the structure is clean, the accounts are simple, and there's no risk that rental income is being used to subsidise an unrelated business. Most BTL lenders who accept company applications will only lend to SPVs.
Setting up an SPV is straightforward. You register a new limited company at Companies House using one of the relevant property SIC codes (68100 — buying and selling of own real estate, or 68209 — other letting and operating of own or leased real estate), open a business bank account, and arrange the mortgage in the company's name.
The Core Tax Argument: Section 24 and Mortgage Interest Relief
The main reason landlords move to limited companies is Section 24 — the restriction on mortgage interest relief for personal landlords introduced from 2017 and now fully in force.
How it works for personal landlords: Instead of deducting mortgage interest from rental income before calculating your tax bill, you receive only a 20% tax credit on the interest paid. For a basic-rate taxpayer, this makes no practical difference. For a higher-rate taxpayer paying 40%, it's highly damaging — you're paying tax on income that's already been consumed by mortgage interest.
From April 2027, that tax credit drops further to 18%, tightening the squeeze again.
How it works inside a limited company: A company can still deduct mortgage interest as a business expense in full before calculating its taxable profit. Corporation tax is then paid on the net profit — at 19% for profits under £50,000, rising to 25% for profits over £250,000, with marginal relief in between.
A simplified illustration for a higher-rate taxpayer:
Assume a rental property with:
- Annual rent: £18,000
- Mortgage interest: £9,000
- Other allowable costs: £2,000
- Net profit before interest deductions: £7,000
| Personal (higher rate) | Limited Company | |
|---|---|---|
| Taxable income | £18,000 − £2,000 = £16,000 | £18,000 − £9,000 − £2,000 = £7,000 |
| Tax credit / deduction for interest | 20% credit = −£1,800 | Fully deducted above |
| Tax rate | 40% | 19% (small company rate) |
| Tax bill | (£16,000 × 40%) − £1,800 = £4,600 | £7,000 × 19% = £1,330 |
The difference is stark for a higher-rate taxpayer. The gap narrows significantly for basic-rate taxpayers.
Important: This is a simplified illustration. Your actual tax position depends on your total income, the size of your portfolio, and how you extract profits from the company. Always run the numbers with a qualified accountant.
The Tax Rates to Know for 2026/27
Corporation Tax
- 19% — profits under £50,000
- 25% — profits over £250,000
- Marginal relief applies between £50,000 and £250,000
Dividend Tax (increased from April 2026)
When you extract profits from the company as dividends, you pay dividend tax on top of corporation tax already paid. Rates from 6 April 2026:
| Band | Rate (2026/27) |
|---|---|
| Basic rate (up to £50,270) | 10.75% |
| Higher rate (£50,271–£124,100) | 35.75% |
| Additional rate (over £125,140) | 39.35% |
The dividend allowance remains at £500 — only the first £500 of dividend income is tax-free.
The important nuance: Dividend tax rates rose from April 2026 (up from 8.75% / 33.75% at basic and higher rate). The gap between the company route and personal name has narrowed. For landlords at the 25% corporation tax rate combined with the higher-rate dividend tax of 35.75%, the overall effective rate on extracted income is moving closer to personal tax rates.
For many landlords, this makes retaining profits inside the company the more efficient strategy — reinvesting into the portfolio rather than extracting as income each year.
Making Tax Digital (MTD)
From 6 April 2026, MTD for Income Tax is mandatory for most sole traders and landlords with gross income above £50,000. This means quarterly digital submissions to HMRC. A limited company structure is naturally aligned with this — company accounts are already digitally maintained. For personal landlords approaching the £50,000 threshold, the admin burden of MTD is one more reason some are considering incorporation.
The Costs of Using a Limited Company
It's not all tax saving. There are real additional costs to factor in.
Higher mortgage rates
Limited company BTL rates have historically carried a small premium over personal name products. In 2026, that gap has narrowed significantly — some lenders now offer identical rates for personal and company applications. Others still carry a premium of 0.1–0.3%. Rates for limited company BTL currently sit broadly between 4.5% and 6.5% depending on LTV, property type, and lender.
Personal guarantee requirements are standard — the lender will require directors/shareholders to guarantee the loan personally, so the company structure doesn't remove personal liability for the mortgage.
Accountancy and compliance costs
Running a limited company means:
- Annual accounts filed at Companies House
- Corporation Tax return filed with HMRC
- Potentially higher professional fees (£800–£2,000+ per year depending on complexity)
- Separate business bank account
For a single-property landlord, these running costs can eat into the tax saving. For a portfolio of three or more properties, the maths usually shifts clearly in favour of the company.
No personal CGT annual exempt amount
Individuals get a £3,000 CGT annual exempt amount when they sell. A limited company has no equivalent — all gains are subject to corporation tax at the relevant rate. If your primary goal is long-term capital appreciation rather than income, this is a meaningful downside to the company structure.
Dividend tax on extraction
Profits inside the company are only tax-efficient if they stay there or are extracted via pension contributions. If you need regular income from the portfolio, the corporation tax + dividend tax combination can reduce the advantage, particularly at the 25% rate combined with higher-rate dividend tax.
Transferring Existing Properties Into a Company: Proceed With Caution
One of the most common questions is whether to move an existing personal portfolio into a company. The short answer: usually not worth it unless the portfolio is large and specialist tax advice says otherwise.
The transfer counts as a sale at market value, triggering:
- SDLT at the additional dwelling surcharge rate on the full market value — a portfolio worth £800,000 could attract SDLT of £50,000 or more
- CGT on any gain accrued since purchase at 18% or 24%
- Two sets of conveyancing costs
- Lender consent is needed or the mortgage must be refinanced
Incorporation Relief under s.162 TCGA 1992 can defer CGT if the portfolio constitutes a genuine property business — but this requires demonstrating significant management involvement (typically around 20 hours per week). Most passive landlords don't meet this test.
The limited company decision is almost always about future purchases, not restructuring what you already own. Get the structure right from the start.
Who Does the Limited Company Route Actually Work For?
Strong case for a company
- Higher-rate or additional-rate taxpayers — Section 24 hurts you most, and the company structure restores full mortgage interest deductibility
- Portfolio builders — if you plan to reinvest rental income rather than extract it, profits retained inside the company compound more efficiently
- Long-term holders — if you don't need the income now, the company lets you defer personal tax until you're ready to extract (at a point when you might be in a lower band)
- Estate planning — shares in an SPV are more easily transferred to family members than individual properties; alphabet share structures allow flexible income allocation between spouses or family members
Weak case for a company
- Basic-rate taxpayers with one property — Section 24 doesn't hurt you the same way, and the extra accountancy costs and complexity may outweigh the marginal tax saving
- Short-term investors — if you plan to sell within a few years, the lack of CGT exemption inside the company is a real cost
- Landlords who need regular income from the portfolio — double taxation (corporation tax then dividend tax) reduces the advantage, especially at higher profit levels
Setting Up an SPV: The Practical Steps
- Register with Companies House — use SIC code 68100 or 68209. This takes minutes and costs £50 online.
- Get a specialist BTL mortgage broker — not all brokers understand limited company lending. Use one with access to the full BTL market.
- Open a dedicated business bank account — keep rental income and expenses completely separate from personal finances.
- Appoint an accountant — corporation tax returns and annual accounts are mandatory. Budget this cost from day one.
- Set up a shareholder structure — if you're married or have a partner, consider how shares are split. Dividend income can be split in proportion to shareholding, allowing use of both personal allowances and lower-rate bands.
Most lenders require no more than four directors/shareholders, all of whom must provide personal guarantees.
Bottom Line: Run Your Numbers, Don't Follow the Crowd
The fact that 80% of new BTL purchases now go through companies doesn't mean it's automatically right for you. The April 2026 dividend tax increase has narrowed the gap, and for landlords at the 25% corporation tax rate who need regular income extraction, the company advantage is smaller than it was.
The case is strongest for:
- Higher-rate taxpayers building a portfolio they plan to hold long term
- Landlords who can reinvest profits rather than extract them immediately
- Anyone with an estate planning angle to consider
If you're a basic-rate taxpayer with one or two properties and a relatively modest mortgage, the maths may not stack up once accountancy costs are factored in.
Run a proper tax comparison with an accountant before you commit. The structure you choose at acquisition is the one you'll likely be living with for years — changing it later is expensive.
Related guides: BTL mortgage rates in June 2026 | Should you hold or sell your BTL property? | HMO vs standard BTL: which is better in 2026?
Disclaimer: This article is for informational purposes only and does not constitute financial or tax advice. Tax rates and legislation change frequently. Always consult a qualified accountant or tax adviser before making decisions about your property investment structure.