Buying Property Through a Limited Company in the UK – A Complete Guide
Buying property through a limited company is becoming increasingly popular in the UK, especially among landlords and investors. This trend has accelerated in recent years due to tax reforms and changing lending rules. But is it the right strategy for everyone?
This guide covers how it works, the tax implications, benefits and drawbacks, and when buying through a company might make sense for your goals.
Table of Contents
What It Means to Buying Property Through a Limited Company
When you buy a property through a limited company, the company, not you personally, becomes the legal owner. You may own the company as a shareholder and act as a director, but it’s the company that holds the title to the property.
This structure is often used by landlords, particularly those planning to build a portfolio. The company earns the rental income, pays expenses, and is taxed accordingly.
Why More People Are Choosing This Route
The main driver behind this trend is the reduction of tax relief on mortgage interest for individual landlords. Since 2020, private landlords can no longer deduct full mortgage interest from their rental income. Instead, they receive a flat 20% tax credit, which can lead to a significantly higher tax bill for higher-rate taxpayers.
Companies, however, can still deduct the full amount of mortgage interest as a business expense, which makes this route far more tax-efficient for many.
Benefits of Buying Through a Limited Company
Full Mortgage Interest Deduction
A limited company can deduct the full amount of mortgage interest from rental income. This is a major advantage for landlords with leveraged properties, as it directly lowers taxable profit.
Lower Corporation Tax Rates
Profits earned through a company are subject to corporation tax rather than personal income tax. Corporation tax is currently 19% for profits under £50,000 and can go up to 25% depending on the size of your profits. For many landlords, this is much lower than personal tax rates, which can reach up to 45%.
Reinvest Profits Tax-Efficiently
Profits can be retained within the company to reinvest in more property without triggering personal income tax. This allows portfolio growth without the burden of withdrawing profits each year.
Limited Liability Protection
Your personal assets are legally separated from the company’s assets. If the company faces legal claims or debts, your personal finances are generally protected.
Easier Succession Planning
Instead of transferring ownership of individual properties, you can transfer shares in the company. This can simplify inheritance planning and, in some cases, reduce tax liabilities when passing assets on to heirs.
Professional Image and Scalability
Using a limited company often signals a more professional operation. This can help when working with agents, securing finance, or building long-term partnerships.
Drawbacks to Consider
Higher Mortgage Rates and Fewer Lenders
Limited company buy-to-let mortgages typically have higher interest rates than personal ones. There are also fewer lenders offering these products, and most will require you to provide a personal guarantee.
More Administration
You’ll need to file annual accounts with Companies House, submit a corporation tax return, and keep accurate financial records. These tasks often require the help of an accountant, which adds to ongoing costs.
Stamp Duty Surcharge
Properties bought through a limited company are subject to a 3% Stamp Duty Land Tax (SDLT) surcharge on top of the normal rate. This applies to all buy-to-let properties, regardless of the number owned.
No Capital Gains Tax Allowance
Unlike individuals, companies don’t benefit from the £3,000 capital gains tax allowance. When the company sells a property at a profit, the full gain is taxable.
Double Taxation When Withdrawing Profits
Once profits are taxed at the corporate level, they may be taxed again when withdrawn as dividends. Dividend tax rates range from 8.75% to 39.35% depending on your income.
Step-by-Step Guide to Buying Through a Limited Company
1. Set Up the Company
Register a limited company with Companies House. Most landlords create a Special Purpose Vehicle (SPV) specifically for holding property, using SIC codes such as 68100 (buying and selling real estate) or 68209 (other letting and operating of own or leased real estate).
2. Open a Business Bank Account
You’ll need a dedicated business bank account for the company to receive rent, pay expenses, and manage cash flow.
3. Get a Limited Company Mortgage
Speak to a mortgage broker who specialises in limited company buy-to-let mortgages. Requirements typically include:
- 25% to 40% deposit
- Personal guarantee
- Business plan or projected cash flow
- Strong personal credit history
4. Instruct a Solicitor and Accountant
Your solicitor handles the legal side of the purchase, while your accountant helps with company setup, tax planning, and filing obligations.
5. Pay Stamp Duty and Complete the Purchase
Your solicitor will calculate the SDLT due, including the 3% surcharge, and manage the Land Registry process.
6. Register for Corporation Tax
You must register with HMRC within three months of starting business activity, which includes buying or renting out property.
7. Manage Ongoing Compliance
Submit annual accounts to Companies House, file a corporation tax return with HMRC, and ensure all financial activity is accurately recorded.
When Is It Worth Buying Through a Limited Company?
This route isn’t right for everyone, but there are specific scenarios where it makes sense:
Ideal for:
- Higher-rate taxpayers with more than one property
- Long-term investors who plan to reinvest profits
- Those planning to build a large rental portfolio
- Investors thinking ahead to inheritance planning
Probably not ideal for:
- First-time landlords or those with only one property
- People wanting to draw income immediately
- Those avoiding extra admin or legal complexity
Real-World Example
Let’s say you earn £10,000 in rental profit annually with a mortgage. As an individual in the higher tax bracket, you might pay over £4,000 in income tax once mortgage interest restrictions are factored in.
If the same profit were earned in a limited company, and assuming a 19% corporation tax rate, the tax liability would be just £1,900. Even after some dividend tax on withdrawals, you could come out significantly ahead.
However, if you need to withdraw most of your profits right away, the dividend tax could cancel out much of the benefit.
Common Questions
Can I live in a property owned by my limited company?
Generally, no. This could trigger benefit-in-kind taxes and would likely breach the terms of your mortgage.
Can I transfer an existing property into my company?
You can, but doing so is usually expensive. You’d need to pay capital gains tax, SDLT, and potentially early mortgage repayment charges.
Does it affect my status as a first-time buyer?
No. If your company buys a property, you may still qualify personally as a first-time buyer later.
Can I deduct other expenses as well?
Yes. Limited companies can deduct letting agent fees, insurance, maintenance, and other legitimate costs from their income.
Final Thoughts
Buying property through a limited company offers real tax efficiencies and legal protections—especially for higher-rate taxpayers and serious investors. But it also brings higher costs, stricter lending rules, and added admin.
The key is to look at your long-term goals. Are you building a portfolio and reinvesting profits? A company structure might be ideal. Are you looking for a simple buy-to-let with regular income? You may be better off owning the property personally.
Speak to a specialist accountant and mortgage broker before making the decision. With the right strategy, buying through a limited company can be a powerful tool to grow and protect your property investments.