Should I buy a rental property through a limited company?

These days, many landlords decide to buy a rental property through a limited company – and there are certainly some benefits.

In many cases, this method is more tax-efficient than buying as a private individual, making it increasingly popular with investors.

However, there are a few things you’ll need to consider before purchasing property through a limited company.

Benefits of buying through a company

Tax efficiency

The biggest advantage of buying residential property through a company is that it can lead to tax efficiency if you’re a higher-rate taxpayer.

If you rent out a property as a private individual, you’ll have to pay income tax on your earnings, which means the bill can get fairly steep for those who fall into the higher or additional tax brackets.

Meanwhile, limited companies only need to pay corporation tax. For those who pay the higher rates, this could result in a significantly reduced tax bill if you do not withdraw the profits from the company.

Deductible mortgage expenses

Limited companies can also have more opportunities for tax planning than private landlords.

Mortgage interest, for example, is treated as a business expense for limited companies. That means you can usually deduct the interest costs of loans before paying corporation tax. Meanwhile, private individuals face more restrictions on offsetting loan interest against rental profits.

Every situation is different, though, which is why it’s always best to seek advice.

Limited liability

One advantage of purchasing property through a limited company is that you usually won’t be as liable if things go wrong. That means that, in most cases, the financial liability for any debts owed by the company won’t extend to directors or shareholders personally.

Of course, the main exception to this is if you have given personal guarantees against debts.

Downsides to incorporating

While buying property through a limited company has some major advantages, there are some drawbacks to this method.

Extra hassle

Setting up an incorporated business comes with its own set of rules and paperwork that you’ll have to keep up with.

For starters, you’ll have to register with Companies House as well as prepare various documents agreeing on how to run your company. Once your company is set up, you’ll have a lot of reporting obligations to HMRC, which can be complicated and time-consuming.

That said, you don’t necessarily need to handle the extra tasks by yourself. An accountant can take on much of this workload for you, from providing company formation services to get you off the ground, to submitting your tax returns on your behalf.

Limited choice

The number of mortgage products available for limited companies can be limited, although there are signs that this is improving.

Traditionally, many buy-to-let lenders prefer to lend to individuals, and those who do lend to limited companies are likely to offer higher interest rates.

This may make it harder for you to arrange a mortgage.

Income tax on profits

If you buy a property through a limited company, you’ll generally pay yourself – either via a salary or dividends – to access the rental income. That means you’ll have to pay income tax on the money that you withdraw.

While those who plan to leave the profits in the company likely won’t face a problem, landlords reliant on rental income may be negatively affected.

We recommend working with an accountant to help you crunch the numbers and find out if buying through this method is the most tax-efficient choice.

Getting the most out of your investment

There are a lot of benefits to buying a rental property through a limited company, but it can be a complicated process. If you’re considering purchasing a buy-to-let property, accessing our specialist advice for landlords can help you explore all your options.

Chat with us today to find out how we can help you get the most out of your rental properties.


The information provided is of a general nature. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from an appropriate professional before you take any action or refrain from action. Whilst we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error free and up-to-date information, we do not warrant that it is such. We and our associates disclaim all warranties. The information can only provide an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice.

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