More landlords now hold buy-to-let property through a limited company, often called a special purpose vehicle (SPV). A company can be significantly more tax efficient for some investors, but it is not the right answer for everyone. We help you weigh up the numbers before you commit.
Why landlords use companies
Individual landlords can no longer deduct mortgage interest in full. Instead they receive a tax credit at the basic rate, which means higher-rate taxpayers effectively lose part of the relief. A company can usually deduct its finance costs in full and pays corporation tax on its profits rather than income tax. With the income tax rates on property income set to rise by two percentage points from April 2027, the gap is widening for many landlords.
The costs to consider
- Extracting profits: income taken as dividends or salary is taxed again in your hands, so the overall saving depends on how much you need to draw.
- Buying property: companies pay the higher SDLT rates on residential property, and the 17% rate can apply to dwellings over £500,000, and ATED may follow unless a relief is available.
- Mortgages: buy-to-let company mortgages may carry different rates and fees, and lenders usually require personal guarantees.
- Running costs: company accounts, confirmation statements and corporation tax returns.
Moving an existing portfolio into a company
Transferring properties you already own is treated as a sale at market value, which can trigger capital gains tax and SDLT. Reliefs may be available in limited circumstances, for example where the letting activity amounts to a business, but they are narrowly drawn and HMRC looks closely at incorporation arrangements. We advise caution with marketed schemes, including some hybrid LLP structures, and will tell you plainly where we think the risk outweighs the benefit.
Family investment companies
A company with different classes of shares can allow profits and future growth to be shared with family members, and can form part of longer-term succession and inheritance tax planning. We design share structures to match your objectives and keep them under review.
How we help
- Side-by-side projections of personal versus company ownership
- Cash flow forecasts that reflect your mortgage costs
- Company formation, share structure and shareholder agreements
- Incorporation advice and HMRC clearances where appropriate
- Annual accounts, corporation tax and dividend planning
Related services and insights
- Business Restructuring
- Succession & Profit Extraction
- Family Business Services
- Landlords & Property Management
- Annual Tax on Enveloped Dwellings (ATED)
- Tax update October 2024: Autumn Budget 2024 key changes
Get the numbers first
Book an appointment and we will model the options for your portfolio.
