Limited Company Buy to Let Mortgage

Buying rental property through a limited company has become the dominant strategy for UK landlords. Around 80% of new buy to let purchases are now made through a company structure, most commonly a Special Purpose Vehicle (SPV). The shift accelerated after Section 24 changed how mortgage interest is treated for individual landlords, and the tax advantages of incorporating are now well established.

This guide covers everything you need to know about limited company buy to let mortgages: how they work, how lenders assess them, the tax benefits, the costs, and whether this route makes sense for your circumstances.

What Is a Limited Company Buy to Let Mortgage?

A limited company buy to let mortgage is a loan secured against a rental property that is owned by a limited company rather than by you personally. The company, not you as an individual, is the legal owner of the property and the borrower on the mortgage. In most cases, the company is set up specifically to hold property, which is known as an SPV.

Lenders treat these differently from standard buy to let mortgages. The company applies for the mortgage, but as a director and shareholder, you will typically need to provide a personal guarantee. This means you are still personally liable if the company defaults on the loan.

Why Section 24 Changed Everything

Before April 2017, individual landlords could deduct mortgage interest from their rental income before calculating their tax bill. Section 24 of the Finance Act 2015 phased this out between 2017 and 2020. Individual landlords can now only claim a 20% tax credit on their mortgage interest, rather than deducting the full amount from income.

For higher rate and additional rate taxpayers, this created a significant increase in their tax liability. A landlord earning rental profit of £30,000 with mortgage interest of £15,000 would previously have been taxed only on the £15,000 net profit. Under Section 24, they are taxed on the full £30,000 and receive a 20% credit on the £15,000 interest, which is £3,000. For a 40% taxpayer, the tax bill went from £6,000 to £9,000.

Limited companies are not affected by Section 24. A company can still deduct the full mortgage interest payment as a business expense before calculating its taxable profit. This single difference is the primary reason most new landlords now use a company structure.

Corporation Tax and How Company Profits Are Taxed

For the 2025/26 tax year, corporation tax rates in the UK are as follows:

• Small profits rate: 19% on profits up to £50,000
• Main rate: 25% on profits above £250,000
• Marginal relief: A tapered rate applies to profits between £50,000 and £250,000, resulting in an effective rate between 19% and 25%

For most landlords with a small portfolio, profits will fall within the small profits band, meaning a 19% corporation tax rate. Compare this with higher rate income tax at 40% or additional rate at 45%, and the tax saving is substantial.

Profits retained within the company are only subject to corporation tax. If you extract profits as dividends, you will also pay dividend tax at your personal marginal rate. For the 2025/26 tax year, dividend tax rates are 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate), with a £500 tax free dividend allowance.

Worked Tax Comparison

Consider a property generating £18,000 in annual rent with £8,000 in mortgage interest and £2,000 in other allowable expenses.

Individual landlord (40% taxpayer):

• Taxable rental income: £18,000 minus £2,000 expenses = £16,000 (mortgage interest is not deductible)
• Income tax at 40%: £6,400
• Section 24 tax credit (20% of £8,000): minus £1,600
• Net tax bill: £4,800

Limited company:

• Taxable profit: £18,000 minus £8,000 interest minus £2,000 expenses = £8,000
• Corporation tax at 19%: £1,520
• Tax saving by using a company: £3,280 per year on a single property

If the company retains the profit rather than distributing it as dividends, no further personal tax is due. This makes the company structure particularly effective for landlords who want to reinvest profits into additional properties.

SPV Structure for Buy to Let

Most lenders require the company to be a Special Purpose Vehicle. An SPV is a limited company set up solely to own and manage property. It cannot trade, provide services, or carry out any other business activity.

When registering the company with Companies House, you will need to use the correct Standard Industrial Classification (SIC) codes. The most commonly accepted codes for property SPVs are:

• 68100: Buying and selling of own real estate
• 68209: Other letting and operating of own or leased real estate

Registration costs £12 online and is typically processed within 24 hours. You will also need to file annual accounts and a confirmation statement with Companies House each year. The company must maintain its own bank account, and all rental income and expenses should flow through this account.

For more detail on SPV structures and how they work, see our guide on SPV mortgages.

Incorporation Relief and Transferring Existing Properties

If you already own rental properties in your personal name, you may be able to transfer them into a limited company using incorporation relief under Section 162 of the Taxation of Chargeable Gains Act 1992. This relief allows you to defer Capital Gains Tax on the transfer, provided you transfer the entire rental business (not just individual properties) to the company in exchange for shares.

The conditions for incorporation relief include:

• The properties must form part of a genuine business, not just passive investment
• The entire business must be transferred as a going concern
• The consideration must be wholly or partly in shares
• HMRC must accept that the activity constitutes a business rather than an investment

This is a complex area and HMRC scrutiny is increasing. Not all property portfolios will qualify. Professional advice from a tax specialist is essential before attempting this route.

Stamp Duty on Property Transfers

When transferring a property from your personal name to a limited company, SDLT is payable based on the market value of the property at the time of transfer, not the original purchase price. The company will also pay the additional property surcharge, which is currently 5% on top of standard SDLT rates (increased from 3% in October 2024).

For a property valued at £250,000, the SDLT on transfer to a company would include the 5% surcharge on the first £125,000 (£6,250) plus 7% on the portion from £125,001 to £250,000 (£8,750), totalling £15,000. This is a significant cost that must be weighed against the long term tax savings.

For new purchases through a company, the same surcharge applies. The additional SDLT cost is an unavoidable part of the company buy to let structure.

Lender Criteria for Limited Company Buy to Let Mortgages

Lender requirements vary, but the following criteria are common across most providers:

• Company type: Must be a UK registered SPV with appropriate SIC codes. Trading companies are rarely accepted for buy to let lending.
• Directors and shareholders: Most lenders require all directors and shareholders to be named on the mortgage application and provide personal guarantees.
• Minimum personal income: Many lenders require at least one director to have a minimum personal income, typically £25,000 per year, though some will accept lower if rental coverage is strong.
• Rental coverage: The expected rent must cover at least 125% to 145% of the mortgage payment at a stress test rate, which is usually the pay rate plus a margin or a minimum of around 5.5%.
• Credit history: Directors’ personal credit is assessed. Adverse credit will limit options but does not necessarily prevent lending.
• Property type: Standard residential property is most straightforward. HMOs, multi unit freehold blocks, and commercial property have fewer lender options.
• Experience: Some lenders require evidence of landlord experience, particularly for portfolio lending.

Deposit Requirements

Most limited company buy to let mortgages require a minimum deposit of 20% to 25%, meaning a maximum loan to value (LTV) of 75% to 80%. Some specialist lenders offer up to 85% LTV, but rates increase significantly at higher LTV tiers.

The deposit can come from the director personally, from retained company profits, or from other legitimate sources. Gifted deposits are sometimes accepted depending on the lender.

Rates: Company vs Personal Buy to Let

Limited company buy to let mortgage rates have become increasingly competitive. The premium over personal buy to let rates has narrowed considerably and is now typically 0.1% to 0.5% higher. In many cases, the corporation tax savings far outweigh the small rate difference.

As of early 2026, competitive limited company buy to let fixed rates start from around 4.5% to 5.5% for a two year fix at 75% LTV, depending on the lender and property type. Five year fixes are also widely available.

Most limited company buy to let mortgages are interest only, which keeps monthly costs low and maximises cash flow. Repayment options are available but less common in this market.

Pros and Cons of a Limited Company Buy to Let

Advantages

• Full mortgage interest relief as a business expense (not affected by Section 24)
• Corporation tax at 19% to 25% instead of income tax at up to 45%
• Retained profits are taxed only at corporation tax rates, allowing faster reinvestment
• Limited liability provides some protection of personal assets
• Greater flexibility for succession planning and transferring shares
• Multiple shareholders can be added, which is useful for joint ventures

Disadvantages

• Higher mortgage rates compared to personal buy to let (though the gap is narrowing)
• SDLT surcharge on every purchase (5% above standard rates)
• Annual accounts, corporation tax returns, and Companies House filings are required
• Accountancy costs are higher, typically £500 to £1,500 per year depending on portfolio size
• Extracting profits via dividends triggers additional personal tax
• Personal guarantees mean limited liability is not absolute
• Fewer lender options compared to the personal buy to let market
• Transferring existing personal properties into a company incurs SDLT and potentially CGT

Companies House Requirements

Running a property company involves ongoing compliance obligations:

• Annual accounts: Must be filed within 9 months of the company’s financial year end
• Confirmation statement: Filed annually with Companies House (£13 online)
• Corporation tax return (CT600): Filed with HMRC within 12 months of the accounting period end
• Corporation tax payment: Due 9 months and 1 day after the end of the accounting period
• Registered office: The company must maintain a registered office address in England, Wales, Scotland, or Northern Ireland
• People with Significant Control (PSC) register: Must be kept up to date

Failure to file on time results in automatic penalties. Late annual accounts attract a £150 fine if up to one month late, increasing to £1,500 if more than six months late.

Is a Limited Company Buy to Let Right for You?

A limited company structure tends to make sense if you are a higher rate or additional rate taxpayer, if you plan to build a portfolio rather than buy a single property, and if you intend to retain profits within the company to fund further purchases. It is less beneficial if you are a basic rate taxpayer with one or two properties and need to extract all the rental income for personal living costs.

The decision should be based on a proper analysis of your personal tax position, your long term goals, and the costs involved. An accountant with property investment experience can model the numbers for your specific circumstances.

For related guidance, see our pages on buy to let mortgages, SPV mortgages, and self employed buy to let.

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