Section 24 vs Company Ownership: Which Property Structure Wins on Tax?

Company ownership usually wins on tax for higher-rate landlords with mortgages, because a limited company deducts mortgage interest in full while an individual landlord is restricted to a 20% tax credit under Section 24. Whether that advantage is worth the cost of incorporating depends on your tax band, your borrowing, and how long you plan to hold the property. The Section 24 landlord tax UK rules changed the maths for buy-to-let: they stop individuals treating finance costs as a normal deduction, which inflates taxable profit and pushes many landlords into higher tax. Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice, helps landlords across the UK decide which structure serves them best. This article compares personal and company ownership with worked figures for 2026/27.

Key Takeaways

• Section 24 gives individual landlords only a 20% basic-rate tax credit on mortgage interest, so a higher-rate taxpayer effectively loses 20% of the relief they once received.
• A limited company is not subject to the finance costs restriction and deducts mortgage interest in full before paying corporation tax at between 19% and 25% in 2026/27.
• A higher-rate landlord paying £10,000 of mortgage interest loses around £2,000 a year to Section 24 compared with full relief.
• Incorporation can trigger stamp duty land tax and capital gains tax on transfer, so the switch suits growing portfolios rather than a single low-geared property.
• Extracting company profit as dividends is taxed again at 10.75% to 39.35% in 2026/27, so the company advantage is largest when profits are retained and reinvested.

What is Section 24 and how does it affect landlord tax?

Section 24 is the finance costs restriction that prevents individual landlords deducting mortgage interest from rental income, replacing the deduction with a tax credit worth 20% of those costs. Introduced in stages from 2017 and fully in force since April 2020, it means taxable rental profit is now calculated before finance costs, which raises the profit figure HMRC assesses.

The effect depends entirely on your tax band. A basic-rate landlord broadly breaks even, because the 20% credit matches their 20% tax rate. A higher-rate taxpayer is taxed at 40% on profit that still includes the interest, then receives relief at only 20%, losing the 20% difference. The inflated profit can also reduce the personal allowance, tip a landlord into the higher-rate band, or claw back child benefit. This is why mortgage interest relief landlord planning now matters far more than it did before 2017.

How does company ownership avoid Section 24?

A limited company avoids Section 24 entirely because the finance costs restriction applies only to individuals, not to companies. Inside a company, mortgage interest is an ordinary business expense deducted in full before corporation tax is calculated, restoring the treatment landlords lost personally.

Company profits are taxed at the corporation tax rates for 2026/27: 19% on profits up to £50,000, a marginal rate between £50,000 and £250,000, and 25% above £250,000. Because interest is fully deductible, the taxable base is smaller than it would be for an individual. The trade-off is that money taken out of the company as salary or dividends is taxed a second time in your hands, so the structure works best when profits are retained to repay debt or buy more property rather than drawn as income.

Worked example: higher-rate landlord, personal vs company

A higher-rate landlord with £20,000 rental income and £10,000 mortgage interest is around £4,100 a year better off holding the same property in a company. The figures below show why.

Held personally, the £20,000 is taxed at 40%, giving £8,000 of tax. The landlord then receives a 20% credit on the £10,000 interest, worth £2,000, leaving a net bill of £6,000. Because the finance costs restriction denies full relief, the effective tax on real profit of £10,000 (income less interest) is 60%.

Held in a company, the £10,000 interest is deducted first, leaving £10,000 taxable profit. At the 19% small profits rate that is £1,900 of corporation tax. If the profit is retained to reduce borrowing, no further tax arises and the saving against personal ownership is around £4,100. If every penny is drawn as a dividend, dividend tax at 10.75% or above applies to the balance, narrowing but rarely erasing the advantage.

Moving an existing portfolio into a company is a disposal in its own right, with costs set out in our guide to moving a portfolio into a limited company.

When does personal ownership still win?

Personal ownership often wins for basic-rate landlords, low-geared properties, and those who need the rental income to live on. A basic-rate taxpayer is broadly unaffected by Section 24, so the cost and complexity of a company add little value.

Incorporating an existing property is a sale to the company at market value, which can trigger capital gains tax on any gain and stamp duty land tax on the transfer, including the higher rates for additional dwellings. Companies also pay commercial buy-to-let mortgage rates, which are typically higher than personal ones, and face annual accounts and corporation tax filing costs. For a single flat owned outright, or where income is drawn in full each year, these costs can outweigh the Section 24 saving. For the full picture, see our guide to tax on rental income.

Frequently Asked Questions

Does Section 24 apply to limited companies?

No, Section 24 does not apply to limited companies. The finance costs restriction applies only to individuals and partnerships letting residential property. A company deducts mortgage interest in full as a business expense before paying corporation tax, which is the main tax reason landlords consider incorporating a geared portfolio.

How much does Section 24 cost a higher-rate landlord?

Section 24 costs a higher-rate landlord roughly 20% of their annual mortgage interest. On £10,000 of interest that is about £2,000 a year, because the landlord is taxed at 40% on profit that includes the interest but receives relief at only 20%. Additional-rate taxpayers lose slightly more.

Do I pay stamp duty when moving property into a company?

Yes, in most cases. Transferring a property into your own limited company is treated as a sale at market value, so stamp duty land tax applies, usually including the 5% surcharge for additional residential dwellings. Capital gains tax may also arise on any increase in value since you bought the property.

Is company ownership always better for landlords?

No, company ownership is not always better. It typically benefits higher-rate landlords with significant mortgage borrowing who retain profits to grow. Basic-rate taxpayers, owners of low-geared property, and landlords who need the income to live on often find personal ownership simpler and cheaper once incorporation costs are counted.

How are company profits taxed when I take them out?

Company profits drawn as dividends are taxed at 10.75% at the ordinary rate, 35.75% at the upper rate, and 39.35% at the additional rate in 2026/27, after a £500 dividend allowance. This second layer of tax means the company advantage is greatest when profit is reinvested rather than extracted.

How Blue Tick Can Help

Blue Tick Accountants advises landlords on whether personal or company ownership produces the lower overall tax bill, modelling incorporation costs, mortgage rates and long-term plans before you commit. A structure that suits a growing portfolio can be the wrong answer for a single property, and the right analysis pays for itself. Head to our website and book a meeting now.

Conclusion

Company ownership tends to win on tax for geared, higher-rate portfolios where profits are reinvested, while personal ownership stays simpler and often cheaper for basic-rate landlords and low-borrowing properties. The decision turns on your tax band, your mortgage costs, and how long you will hold. Model the full picture, including stamp duty and capital gains tax on transfer, before restructuring, and take advice so the switch genuinely saves money rather than simply moving the tax around.

About the Author

This guide was written by Leon, founder of Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that helps landlords, limited company owners and the self-employed across the UK. 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.