Property Company vs Personal Ownership: A Full Tax Comparison

A limited company beats personal ownership on annual rental profit and mortgage interest relief, and loses on capital gains, profit extraction and entry cost. A landlord who looks only at the corporation tax rate will reach the wrong answer roughly as often as the right one. Property company incorporation for a landlord is a lifecycle decision rather than a one-year calculation: the savings accrue annually while the costs land at the start and at the end. Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice, models both routes across a realistic holding period before advising either way. This article compares personal and corporate ownership on profit, finance costs, sale proceeds, extraction, succession and running cost, using 2026/27 rates throughout.

Key Takeaways

• Personal ownership taxes rental profit at income tax rates of 20%, 40% or 45%, while a limited company pays corporation tax at 19% on profits up to £50,000, a marginal rate between £50,000 and £250,000, and 25% above £250,000 in 2026/27.
• Section 24 restricts an individual landlord's mortgage interest relief to a 20% basic rate tax reducer, whereas a company deducts finance costs in full against rental profit.
• An individual pays capital gains tax on a residential property sale at 24% as a higher rate taxpayer after a £3,000 annual exempt amount, while a company pays corporation tax on the whole gain with no annual exempt amount and no indexation allowance.
• Taking money out of a property company as dividends costs a further 35.75% at the upper rate in 2026/27, above a £500 dividend allowance, which can push the total tax on extracted profit past the personal ownership position.
• Personal ownership carries no running cost, while a small property company typically costs between £900 and £2,000 a year in accountancy, corporation tax return and confirmation statement fees.

How is rental profit taxed personally compared with in a company in 2026/27?

Rental profit held personally is added to your other income and taxed at 20%, 40% or 45%, while the same profit inside a company is taxed at 19% up to £50,000 and 25% above £250,000. For a higher rate taxpayer, the headline gap on retained profit is therefore 21 percentage points.

That gap is narrower than it looks, because the personal figure is the end of the story and the corporate figure is not. Money inside a company belongs to the company: available for deposits on further properties, for repaying company borrowing or for pension contributions, but not available to spend without a second tax charge.

Consider a landlord with £60,000 of employment income and three rental properties producing £54,000 of gross rents, £24,000 of mortgage interest and £8,000 of other allowable costs. Held personally, the taxable rental profit is £46,000 because interest is not deductible, income tax at 40% is £18,400. Total income of £106,000 also tapers the personal allowance by £3,000, adding £1,200, and the 20% interest tax reducer of £4,800 brings the bill to £14,800. Cash retained after tax is £7,200. Held in a company, the taxable profit is £22,000 after full interest relief, corporation tax at 19% is £4,180, and £17,820 stays in the company. On retained profit the company is £10,620 a year ahead.

How does mortgage interest relief differ between the two?

Mortgage interest is fully deductible for a company and only partially relieved for an individual, and this single difference drives most of the case for a limited company buy-to-let. Section 24 of the Finance (No. 2) Act 2015 removed finance costs from the individual landlord's expense list and replaced the relief with a tax reducer worth 20% of the interest.

The consequence is that a personally held, heavily geared portfolio can produce a tax bill larger than its economic profit. A landlord with £40,000 of rents and £35,000 of interest has real profit of £5,000, but taxable profit of £40,000. At 40% that is £16,000 of tax, reduced by £7,000, leaving £9,000 payable on £5,000 of actual profit.

Section 24 also inflates the landlord's total income for other purposes, which can withdraw the personal allowance above £100,000, trigger the high income child benefit charge, or push a basic rate taxpayer into the higher rate. A company escapes all of these, because rental profit never reaches the owner's personal return until it is distributed. Ungeared portfolios feel none of this, which is why interest relief is close to irrelevant for a landlord with no mortgages.

What happens on sale: capital gains tax or corporation tax on gains?

Personal ownership is materially better on disposal. An individual selling a residential investment property pays capital gains tax at 18% within the basic rate band and 24% above it, after a £3,000 annual exempt amount for 2026/27. A company pays corporation tax on the full gain at 19% to 25% with no annual exempt amount, and the indexation allowance has been frozen since December 2017, so inflation is taxed too.

Take a property bought for £200,000 and sold for £320,000, ignoring costs. A higher rate individual pays 24% on £117,000 after the annual exempt amount, or £28,080, and the remaining £91,920 is theirs. A company with profits in the main rate band pays £30,000, leaving £90,000 inside the company. Distributing that £90,000 to the shareholder costs roughly £31,900 in dividend tax at the 35.75% upper rate, so the total tax on the same gain is close to £62,000 against £28,080 personally.

The comparison only holds if the money needs to come out. A company that sells one property and reinvests the proceeds in another keeps the full £90,000 working and defers the second layer of tax indefinitely, so disposal is an argument against companies for landlords who intend to liquidate rather than against companies as such.

What does it cost to get money out of a property company?

Extracting profit from a property company costs 10.75% at the ordinary rate, 35.75% at the upper rate and 39.35% at the additional rate for 2026/27, above a £500 dividend allowance. This second layer of tax is what turns a favourable annual comparison into a marginal one.

Return to the three property example. The company retained £17,820 after corporation tax. Paying that out as a dividend to a landlord already in the higher rate band, using the £500 allowance, costs 35.75% on £17,320, or £6,192. Net cash in hand is £11,628 against £7,200 under personal ownership, so the advantage falls from £10,620 to £4,428 a year.

A director's salary and employer pension contributions soften this. A company can pay a salary of £12,570 to use the personal allowance where it is not already used elsewhere, and employer pension contributions are deductible against corporation tax with no dividend tax on the way out. Directors' loan repayments can also be drawn tax free where the landlord lent money into the company at the start, which is often the most efficient extraction route in the early years of a landlord incorporation guide UK scenario.

What does it cost to move an existing portfolio across?

Transferring property you already own into your own company is a disposal at market value for tax, so capital gains tax and stamp duty land tax both fall due even though no money changes hands. This is the decisive cost for most landlords weighing property company incorporation.

Three properties worth £300,000 each and bought for £200,000 each produce a £300,000 gain, giving capital gains tax of £71,280 at 24% after the annual exempt amount, payable within 60 days of completion. Stamp duty land tax at the 5% higher rates for additional dwellings adds £20,000 per property, or £60,000. With legal and remortgaging costs the entry bill approaches £140,000, against an annual advantage of around £3,200 after extraction on the numbers above.

Section 162 incorporation relief can eliminate the capital gains tax where the letting activity is a genuine business transferred as a going concern in exchange for shares, and transferring six or more dwellings in one transaction allows the non-residential stamp duty rates to apply. Both routes are fact-sensitive and neither is available on request. For a full overview of how these reliefs are claimed and tested, see our guide to property company incorporation.

Which route suits which landlord?

Personal ownership suits basic rate taxpayers, ungeared portfolios, landlords who spend the rental income, and anyone likely to sell within a few years. Corporate ownership suits higher and additional rate taxpayers with mortgaged property who reinvest their profits and intend to hold for the long term or pass the portfolio on.

Succession often decides borderline cases. Company shares can be gifted in slices over many years, and growth shares can direct future value to children while the founder keeps current value, none of which requires conveyancing. Moving legal title in a property to a child, by contrast, is a market value disposal every time.

Two practical points sit outside the tax analysis. Company buy-to-let mortgages usually price above equivalent personal products, and the extra interest absorbs a real share of the saving on a geared portfolio. A company holding a single dwelling worth more than £500,000 also falls within the annual tax on enveloped dwellings regime, and although property rental business relief normally removes the charge, an ATED return is still required each year.

Frequently Asked Questions

Is it better to own property personally or through a limited company?

A limited company is usually better for a higher or additional rate taxpayer with mortgaged property who reinvests the rental profit, because interest is fully deductible and corporation tax starts at 19%. Personal ownership is usually better for basic rate taxpayers, mortgage-free portfolios, and anyone who needs the rental income to live on or plans to sell soon.

How much tax does a property company pay in 2026/27?

A property company pays corporation tax at 19% on profits up to £50,000, a tapered marginal rate between £50,000 and £250,000, and 25% on profits above £250,000 for 2026/27. It pays the same rates on capital gains from selling property, with no annual exempt amount. Dividends paid to shareholders are then taxed separately at up to 39.35%.

Do limited companies pay capital gains tax on property?

Limited companies do not pay capital gains tax. They pay corporation tax on chargeable gains at 19% to 25%, with no £3,000 annual exempt amount and no indexation allowance for periods after December 2017. An individual higher rate taxpayer pays 24% on residential property gains after the annual exempt amount, which makes personal ownership cheaper on disposal in most cases.

Can I move my existing rental properties into a limited company?

Yes, but the transfer is treated as a sale at market value. Capital gains tax is due within 60 days unless section 162 incorporation relief applies, and stamp duty land tax at the 5% higher rates for additional dwellings is payable by the company on the market value. On a £900,000 portfolio the combined entry cost can exceed £130,000.

Does a limited company help with inheritance tax on property?

A property company does not usually reduce the inheritance tax value of a portfolio, because a residential letting business is an investment business and does not qualify for business property relief. What a company does offer is a practical way to pass value on gradually, through gifts of shares and separate share classes, without conveyancing or stamp duty on every transfer.

How Blue Tick Can Help

Blue Tick Accountants runs a full personal versus company comparison for landlords, projecting both routes over the period you actually intend to hold the portfolio and pricing in the entry cost, the extraction cost and the eventual disposal rather than a single year of rental profit. Where the numbers favour staying put, the practice will tell you so and focus on other reliefs instead. Head to our website and book a meeting now.

Conclusion

The company wins on annual profit and mortgage interest, the individual wins on capital gains and simplicity, and the deciding factor is almost always whether the rental income is spent or reinvested. Run the comparison over your real holding period, include the cost of getting the money out, and treat any entry bill of capital gains tax and stamp duty as cash you will not see again. If you are buying rather than transferring, the analysis is far more likely to favour a company, because the entry cost simply does not arise.

About the Author

This guide was written by Leon, founder of Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that advises landlords, limited company owners and the self-employed across the UK on property structuring, incorporation and long term tax planning. It was last reviewed for the 2026/27 tax year.

This article is intended for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are subject to change and their application will depend on your individual circumstances. You should always seek advice from a qualified professional before taking action. Blue Tick Accountants accepts no liability for decisions made on the basis of this content.