When it comes to building wealth through property, the decision to purchase a buy-to-let investment is just the beginning. One of the biggest questions landlords face—especially new investors—is whether to buy a property through a limited company or in their personal name.
This decision can significantly affect your tax bill, long-term profits, mortgage options, and even how easily you can pass your property on to your children. So, which is better: limited company or personal ownership?
Let’s break it down.
What’s the Difference?
Before diving into pros and cons, let’s clarify what each ownership structure means.
- Personal Ownership: You buy the property in your own name (or jointly with a partner). Rental income and capital gains are taxed as part of your personal income.
- Limited Company Ownership: You set up a company (usually a Special Purpose Vehicle or SPV) and buy the property through it. The company is a separate legal entity, and you pay Corporation Tax on profits. You can then draw money out of the company through salary or dividends—each with different tax rules.
The Tax Situation
Personal Ownership
If you’re a higher-rate taxpayer, owning property personally can be quite taxing. Since April 2020, landlords can no longer deduct mortgage interest from rental income before calculating tax. Instead, you get a basic-rate (20%) tax credit.
For example, if your mortgage interest is £10,000 and you earn £15,000 in rent, you’ll be taxed on the full £15,000 and only get a 20% credit on the mortgage interest—even if your actual profit is far lower.
Add in income tax at 40% (or more), and profits can quickly be eaten away.
Limited Company Ownership
In contrast, limited companies pay Corporation Tax on profits—currently at 25% for most landlords. More importantly, they can deduct mortgage interest as a business expense, which can drastically reduce the taxable profit.
However, drawing money out of the company can trigger additional tax. You’ll likely pay:
- Dividend tax (8.75% for basic rate, 33.75% for higher rate)
- Or income tax if you take a salary
So while companies may save tax at the start, getting the money in your hands is where the costs sneak in.
Mortgage Availability
This is one area where personal ownership wins on flexibility. Traditional buy-to-let mortgages are generally cheaper and more varied for individual landlords. You’ll have access to better interest rates and lower arrangement fees.
Limited company mortgages:
- Tend to have slightly higher rates
- Require more paperwork
- Fewer lenders offer them (though this is improving)
That said, if you plan to grow a large portfolio, limited company mortgages might become more efficient over time. Some lenders prefer working with SPVs because they know it’s structured for business.
Long-Term Goals: Growth and Inheritance
Your choice of ownership should reflect your long-term plan. Do you want to:
- Own one or two properties and use the income personally?
- Build a large property portfolio?
- Pass wealth on to your children tax-efficiently?
If your goal is long-term wealth building or intergenerational planning, limited company ownership offers more control.
For example:
- You can retain profits in the company to reinvest without paying personal tax.
- You can gradually transfer shares to your children (with proper planning), which can reduce inheritance tax.
- You can sell the company (not just the property), potentially offering capital gains benefits.
In contrast, personal ownership is simpler but offers fewer options for scaling and succession planning.
Costs and Compliance
Setting up and maintaining a limited company comes with admin duties:
- Annual accounts and tax returns
- Companies House filings
- Accountant fees (often £500–£1,000/year or more)
Personal ownership is simpler: just report rental income on your Self-Assessment tax return.
So if you’re a hands-off landlord or don’t want extra paperwork, personal ownership could be less of a headache.
Real-Life Examples
Example 1: The Small-Scale Landlord
Mark, a higher-rate taxpayer, owns two flats generating £12,000 net rental income each. He has mortgage interest of £10,000 per year.
Under personal ownership, Mark is taxed on the full £24,000, with only a £2,000 tax credit, even though his real profit is only £4,000.
If he used a limited company, he could deduct mortgage interest and pay tax on the actual profit, saving thousands.
But if Mark doesn’t plan to reinvest profits or build a large portfolio, extracting the money from the company may cost more in dividend tax.
Example 2: The Growth-Focused Investor
Sophie wants to build a portfolio of 10+ properties over the next 10 years. She’s in the basic tax bracket now but expects to hit higher-rate levels soon.
Sophie uses a limited company from the start. She reinvests profits to buy more properties and only draws a small salary. Her accountant helps structure dividends and shareholdings to include her children in the future.
For her, the tax savings and control outweigh the extra admin.
Key Considerations
Before deciding, ask yourself:
- What’s your current income tax bracket?
- Are you planning to reinvest profits or spend them?
- Do you want to build a large portfolio?
- Is passing wealth to children part of your plan?
- Are you comfortable with company admin and extra fees?
So, Which is Best?
There’s no one-size-fits-all answer. Here’s a rough guide:
Choose Personal Ownership if:
- You’re buying 1–2 properties
- You’re a basic-rate taxpayer
- You want simplicity and lower upfront costs
Choose Limited Company if:
- You’re a higher-rate taxpayer
- You want to scale up a portfolio
- You plan to reinvest profits
- You’re thinking about inheritance planning
If you’re unsure, it’s wise to speak with a professional. Firms like Jameco Accountants Ashford specialize in property tax planning and can help you decide the most tax-efficient route based on your personal goals and income situation.
Final Thoughts
Owning property is a powerful way to build wealth, especially for those of us balancing family life, careers, and side hustles. Whether you’re a full-time investor or a working parent thinking about future income, your ownership structure can make a big difference.
Before making a decision, talk to a property-savvy accountant. A quick consultation could save you thousands over the years—and help you sleep better knowing your investments are tax-efficient and future-proofed.
Have you already made your choice—or are you weighing the options? I’d love to hear your thoughts in the comments.