Good question — setting up a limited company (Ltd) for buy-to-let property investment has become increasingly popular in the UK, especially since tax rules changed for individual landlords.
Here’s a clear breakdown 👇
🏢 Advantages of a Limited Company Buy-to-Let
1. Tax Efficiency (especially for higher-rate taxpayers)
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Individuals pay Income Tax on rental profits (up to 45%).
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Companies pay Corporation Tax on profits (currently 25% in 2025 for most companies, sometimes lower for smaller profits).
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You can leave profits in the company to reinvest rather than drawing them as income — great for portfolio growth.
2. Mortgage Interest Relief
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Individuals can no longer deduct full mortgage interest from rental income (since 2020, replaced by a 20% tax credit).
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Companies, however, can still deduct 100% of mortgage interest as a business expense before tax — a major advantage.
3. Limited Liability
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Your personal assets are protected — only the company’s assets are at risk if things go wrong.
4. Easier to Share Ownership or Pass On
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You can add shareholders (family, partners) or transfer shares for inheritance or tax planning.
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This can make estate planning and succession easier.
5. Reinvestment Flexibility
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Profits can be reinvested into more properties without drawing income (and paying personal tax).
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Helps compound portfolio growth.
⚠️ Disadvantages / Things to Consider
1. Higher Mortgage Costs
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Limited company buy-to-let mortgages often have higher interest rates and fees.
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Fewer lenders offer them (though this is improving).
2. Accountancy & Setup Costs
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You’ll need company accounts, annual filings, and possibly accountant fees (£600–£1,200+/year).
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Incorporation adds admin complexity.
3. Double Taxation (when taking profits personally)
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If you take money out (e.g., as dividends), you’ll pay Corporation Tax + Dividend Tax — though still often more efficient than income tax for higher earners.
4. CGT & SDLT Issues if Transferring Existing Properties
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Moving properties you already own into a company can trigger:
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Capital Gains Tax (CGT)
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Stamp Duty Land Tax (SDLT) (including the 3% surcharge)
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🧮 Summary Table
| Factor | Individual Ownership | Ltd Company Ownership |
|---|---|---|
| Tax on Rental Profit | Up to 45% Income Tax | 19–25% Corporation Tax |
| Mortgage Interest Relief | 20% tax credit only | Fully deductible |
| Liability | Personal | Limited |
| Reinvestment | Personal funds taxed | Profits reinvested pre-tax |
| Mortgage Rates | Lower | Higher |
| Setup/Admin | Simple | Complex |
| CGT/SDLT transfer | Not applicable | May apply |
