Limited Company vs Personal Name for UK Rental Properties: A Portfolio Landlord's Real-World Dilemma

The Situation: Four Properties, a Salary, and a Growing Tax Problem

David had built something most people only dream about. Over nine years, the 48-year-old GP from Surrey had accumulated four buy-to-let properties — two terraced houses in Sheffield, a flat in Leeds, and a semi-detached in Nottingham. Together, they generated just under £38,000 in annual rental income. Combined with his NHS salary pushing him firmly into the 45% additional-rate tax band, he was watching a significant share of every rent payment disappear before he could reinvest it.

When Section 24 — the restriction on mortgage interest relief for individual landlords — was fully phased in, David's position deteriorated sharply. He could no longer deduct his mortgage interest from rental income before calculating his tax liability. Instead, he received only a 20% basic-rate tax credit. For a higher-rate taxpayer, this meant paying tax on income he wasn't actually earning. His accountant's estimate: an additional £6,200 in tax per year, simply because of how his properties were structured.

David came to us with a simple but loaded question: "Should I have held these in a limited company from the start — and is it too late to fix it now?"

The Diagnosis: Why the Personal Name Structure Was Costing Him

Holding UK rental property in your personal name was, for decades, the default. It's straightforward, requires no additional administration, and — before 2017 — allowed landlords to offset 100% of mortgage interest against rental income. For a basic-rate taxpayer with one or two properties and no plans to expand, it still makes reasonable sense today.

But David's situation exposed the fault lines of personal ownership under the modern tax regime:

• Section 24 (Finance Act 2015): Mortgage interest is no longer a deductible expense for individual landlords. Instead, you receive a 20% basic-rate tax credit regardless of your marginal rate. Higher and additional-rate taxpayers absorb the difference personally.
• Income stacking: Rental profits are added on top of other income. For someone already earning £110,000+ from employment, even modest rental profit is taxed at 45p in the pound.
• Capital Gains Tax (CGT): Individuals selling residential investment property pay 18% (basic rate) or 24% (higher/additional rate) CGT. The annual CGT exemption — once £12,300 — has been slashed to just £3,000 from April 2024.
• No retained profit mechanism: Any profit is taxed in full in the year it arises, whether or not David needed the cash. There was no way to smooth or defer his liability.

A limited company — specifically a Special Purpose Vehicle (SPV) structured as a buy-to-let holding company — operates under entirely different rules. Corporation tax applies to rental profits at 25% (for profits above £50,000). Mortgage interest remains fully deductible as a business expense. Profits can be retained within the company and reinvested without triggering personal income tax until dividends are drawn. For a portfolio landlord in the higher tax brackets, this difference is not marginal — it is structural.

The Numbers Behind the Decision

For David specifically, running his portfolio through a limited company (assuming equivalent rents, mortgages, and costs) would have reduced his annual tax liability on rental income by an estimated £9,400 — nearly a third of his gross rental income. That's not a tax loophole. That's a structural advantage built into company taxation that HMRC explicitly permits.

What Was Tried: The Transfer Question

The obvious next step seemed to be transferring the four properties into a newly formed SPV. David's instinct — and his initial accountant's suggestion — was to simply move the assets across.

What nobody had fully costed out was the tax friction of that transfer. Moving property from personal name to a limited company is not a gift or an internal shuffle — it is a legal disposal at market value. That triggers two costly events simultaneously:

• Capital Gains Tax on disposal: David's four properties had appreciated by a combined £190,000 since purchase. At his marginal CGT rate of 24%, the tax on crystallising those gains would have been approximately £45,600 — payable within 60 days of completion.
• Stamp Duty Land Tax (SDLT) on acquisition: The company purchasing the properties would be treated as a new buyer, triggering SDLT at the standard investment property rates plus the 3% surcharge. On a combined portfolio value of £820,000, this came to roughly £49,000.

Total friction cost: approximately £94,600. At the annual tax saving of £9,400, the breakeven point was just over ten years — before accounting for legal fees, remortgaging costs (as lenders would need to refinance the properties under the company), and the administrative cost of running a company.

This is the calculation that most online articles skip. They extol the benefits of the limited company structure without confronting the cost of getting there once you've already started.

What Actually Happened: A Hybrid Strategy

Rather than a full transfer — expensive and blunt — we worked with David and a specialist tax adviser to implement a forward-looking hybrid structure.

The existing four properties remained in his personal name. The CGT and SDLT exposure made transfer economically irrational in the short to medium term. Instead, we arranged the following:

• A new SPV limited company was incorporated with David and his wife as shareholders, structured to allow income splitting across two personal allowances and two dividend allowances — immediately reducing their combined tax exposure.
• All future acquisitions would be made through the company. David had already identified a fifth property — a small HMO in Derby — which was purchased through the SPV from day one, with a specialist limited company buy-to-let mortgage arranged at a competitive rate.
• A phased disposal plan was built into their longer-term financial planning. As the original four properties mature and market conditions evolve, selective sales can be timed to utilise annual CGT allowances, potentially offset against losses elsewhere, and the proceeds reinvested through the company.
• A director's loan account was structured within the SPV to allow David to extract capital tax-efficiently as the company builds equity.

The result: within 18 months, David's effective tax rate on new rental income dropped from 45% to approximately 25%. His fifth property — acquired through the company — was generating net profit that remained inside the company, compounding rather than being extracted and taxed immediately. His accountant calculated a five-year projected tax saving (on new acquisitions alone) of over £47,000.

The General Lesson: Structure Is a Decision You Make Once, But Live With Forever

David's story is not unusual. We speak regularly with landlords who built portfolios in personal names through the 2000s and early 2010s — sensibly, given the rules at the time — and who now face the structural tax drag of a regime that has fundamentally changed.

The key principles that apply broadly:

• If you're starting out: For most new landlords planning to build a portfolio of two or more properties, a limited company SPV is almost certainly the better long-term vehicle — especially if your personal income already pushes you into the higher or additional rate tax band.
• If you already hold properties personally: Transfer is rarely the right answer unless your portfolio is small, gains are modest, and your time horizon is long. A hybrid approach — retaining existing properties and routing new acquisitions through a company — is frequently the most tax-efficient path.
• Income splitting matters: A company structure allows shareholdings to be distributed among spouses or family members, multiplying the use of personal allowances and dividend allowances. This alone can justify the structure for many couples.
• Lender choice narrows: Limited company buy-to-let mortgages are a specialist product. Rates are typically slightly higher than personal name equivalents, and not all lenders offer them. Working with a broker who has direct access to specialist lenders is not optional — it's essential.
• Tax advice is not optional: The company vs. personal name question has no universal answer. It depends on your marginal income tax rate, the size of accrued gains, your plans for expansion, your exit timeline, and your estate planning goals. A specialist tax adviser and a mortgage broker who understands portfolio structures should work in tandem.

The broader truth is this: structure is the highest-leverage decision a landlord makes. It determines how much of every rent payment you keep, how efficiently you can reinvest, and how cleanly wealth transfers to the next generation. Getting it right from the beginning costs a few hundred pounds in professional advice. Getting it wrong — or restructuring later — can cost tens of thousands. David learned that lesson not as a failure, but as a course correction. For investors who haven't yet committed to a structure, or who are about to acquire their next property, that lesson is worth acting on now.

Key Takeaways

• Section 24 has fundamentally broken the economics of personal-name ownership for higher-rate taxpayers — landlords paying 40% or 45% income tax on rental profits must account for this structural disadvantage.
• Transferring existing properties into a company triggers CGT and SDLT simultaneously — the combined cost frequently makes transfer economically irrational, especially for portfolios with significant appreciation.
• A hybrid structure — retaining existing assets personally and routing new acquisitions through an SPV — is the most practical solution for established landlords looking to optimise going forward.
• Limited company buy-to-let mortgages require specialist brokers; the product range is narrower and lender criteria differ significantly from personal-name lending.
• Income splitting between shareholders can dramatically reduce combined tax liability for couples, making the company structure particularly powerful when both partners have unused allowances.

Frequently asked questions

Is it better to hold buy-to-let properties in a limited company or personal name in the UK?

For higher and additional-rate taxpayers building a portfolio, a limited company SPV is generally more tax-efficient because mortgage interest remains fully deductible and profits are taxed at corporation tax rates (25%) rather than personal income tax rates (40–45%). For basic-rate taxpayers with one or two properties and no expansion plans, personal ownership may still be simpler and cost-effective. The right answer depends on your income level, portfolio size, and long-term strategy.

Can I transfer my buy-to-let properties from personal name to a limited company?

Yes, but the transfer is treated as a disposal at market value, triggering Capital Gains Tax on any accrued gains and Stamp Duty Land Tax for the company as the new buyer. On a portfolio with significant appreciation, these combined costs can easily reach £50,000–£100,000 or more, making transfer economically unviable in many cases. A specialist broker and tax adviser should model the full cost before any transfer is considered.

What is Section 24 and how does it affect landlords?

Section 24 of the Finance (No. 2) Act 2015 removed the ability for individual landlords to deduct mortgage interest as an expense against rental income. Instead, landlords receive only a 20% basic-rate tax credit, regardless of their marginal rate. This means higher and additional-rate taxpayers can end up paying tax on income they haven't actually received, significantly increasing the effective tax burden on leveraged portfolios.

Are limited company buy-to-let mortgages more expensive than personal name mortgages?

Limited company buy-to-let mortgages typically carry slightly higher interest rates than personal-name equivalents, and fewer lenders offer them. However, the tax advantages of holding property within a company often outweigh the additional mortgage cost for landlords in the higher tax brackets. A specialist broker with access to the full market of limited company lenders is essential to securing competitive terms.

Can my spouse be a shareholder in my buy-to-let limited company?

Yes, and structuring shareholdings between spouses or civil partners is one of the most effective ways to reduce combined tax liability within a limited company. Dividends can be distributed to both shareholders, utilising each person's personal allowance and £500 dividend allowance, which can result in meaningful annual tax savings. The arrangement must reflect genuine economic ownership and should be structured with professional tax advice.