Should you buy your next rental property through a limited company? As the UK property market evolves and tax laws tighten, many landlords are exploring this option. In 2025, using a limited company for buy-to-let investment remains a hot topic—offering both compelling benefits and serious considerations.
This guide breaks down the key pros and cons to help you decide if the limited company route is right for your property portfolio.
✅ Pros of Using a Limited Company for Buy-to-Let
1. More Favourable Tax Treatment
Limited companies benefit from paying corporation tax (currently 25% in 2025) on profits, which is often lower than higher-rate income tax (40% or 45%) that individual landlords face. This can result in significant tax savings—especially for higher-rate taxpayers.
2. Full Mortgage Interest Relief
Unlike private landlords, limited companies can still deduct 100% of mortgage interest from rental income before tax. Since the Section 24 mortgage relief changes (fully implemented by 2020), this has been a key advantage for corporate structures.
3. Retain Profits for Growth
Profits inside a limited company can be retained and reinvested into new properties or other ventures, allowing you to scale your portfolio faster without drawing all profits out (and triggering personal income tax).
4. Estate and Inheritance Planning
A limited company allows for flexible share structures, which can support estate planning strategies—such as gifting shares to family members or using a Family Investment Company (FIC) for generational wealth planning.
5. Professional Image and Credibility
Operating through a company can enhance your reputation with lenders, partners, and agents, especially if you’re building a serious portfolio or running an HMO business.
❌ Cons of Using a Limited Company for Buy-to-Let
1. Higher Mortgage Rates and Fewer Lenders
Buy-to-let mortgage rates for companies tend to be higher than those for individual borrowers. Plus, fewer lenders operate in the limited company space, which can limit your options.
2. Setup and Admin Costs
Forming and running a company involves ongoing costs—including:
-
Incorporation fees
-
Annual filing requirements (Companies House, accounts)
-
Accountant fees for corporate tax returns
3. Capital Gains Tax (CGT) Trap When Transferring Property
If you already own property personally, transferring it to a company can trigger CGT and stamp duty land tax (SDLT). This is a key barrier to moving an existing portfolio into a limited company.
4. Tax on Dividends
When you withdraw profits as dividends, you’ll face dividend tax, which starts at 8.75% (basic rate) and can reach 39.35% for higher earners in 2025. This can reduce the overall tax efficiency if you need regular income.
5. Fewer Tax-Free Perks
Individual landlords can access capital gains tax allowance, rent-a-room relief, and personal allowances—which don’t apply inside a company structure.
🔄 Limited Company vs Personal Ownership in 2025
| Feature | Limited Company | Personal Name |
|---|---|---|
| Tax on Rental Profit | 25% (Corp Tax) | 20–45% (Income Tax) |
| Mortgage Interest Relief | Full Deduction | 20% Tax Credit Only |
| Setup & Running Costs | High | Low |
| Mortgage Options | Limited & Costly | Broad & Cheaper |
| Withdrawal of Profits | Dividend Tax | No Extra Tax |
| Estate Planning Flexibility | High | Low |
🧠 Who Should Consider Using a Limited Company?
You might benefit from buying via a company if:
-
You are a higher-rate taxpayer
-
You plan to scale your portfolio
-
You want to leave a property legacy or gift shares
-
You don’t need to draw all profits immediately
If you’re a basic-rate taxpayer with only one or two properties, personal ownership may still be more cost-effective and simple.
📌 Final Thoughts
Using a limited company for buy-to-let in 2025 can be a powerful tool—but it’s not a one-size-fits-all solution. Tax savings, growth potential, and estate planning advantages are balanced by setup costs and complexity.
Always consult a tax advisor or property accountant to explore your individual scenario. The right structure today could save (or cost) you thousands tomorrow.
📩 Want More Tips Like This?
Subscribe to the P2P Money Expert newsletter for regular insights on building passive income through property, crypto, and smart investing strategies.