A recent set of industry data analysis* states that limited companies accounted for a record 43% of mortgaged buy-to-let purchases in 2025, up from 35% the year before.
A limited company buy-to-let mortgage is a loan taken out by a company, usually a Special Purpose Vehicle (SPV) set up purely to hold property, rather than by you personally.
Whether that’s worth doing depends on your tax position, your borrowing, and what you plan to do with the income. It isn’t automatically the better route, so here’s the tax difference, the mortgage differences, and who tends to benefit most.
What Is an SPV?
An SPV is a limited company set up specifically to buy and hold rental property. It can be registered online with Companies House for £100 and is usually incorporated within 24 hours, though more complex applications can take longer. Lenders generally prefer SPVs to trading companies, since a single, clear purpose is easier to assess, and a trading company with other business activities is more likely to be declined or face a narrower choice of lenders.
The Tax Difference
The main reason landlords consider incorporating comes down to mortgage interest. Personally, you can’t deduct full mortgage interest from rental income before working out your tax bill; instead, you get a tax credit worth 20% of your finance costs. For a basic-rate taxpayer that broadly cancels out, but for a higher or additional-rate taxpayer it doesn’t, since you’re taxed at 40% or 45% in England, Wales and Northern Ireland (Scotland has its own bands) but only get relief at 20%, pushing your effective rate on a heavily mortgaged property well above your normal rate.
A limited company has no such restriction: mortgage interest is deducted as a normal expense before profit is calculated, and the company then pays Corporation Tax on what’s left.
| Personal ownership | Limited company (SPV) | |
| Tax on rental profit | Income Tax: 20%, 40% or 45% (E/W/NI; Scotland differs) | Corporation Tax: 19% up to £50,000, rising to 25% above £250,000, marginal relief between |
| Mortgage interest | Not fully deductible; 20% tax credit only | Fully deductible before tax |
| Tends to favour | Basic-rate taxpayers, lower borrowing | Higher/additional-rate taxpayers, higher borrowing |
Rates correct for the current tax year and can change at future Budgets. A further change is scheduled from April 2027, with separate property-income tax rates of 22%, 42% and 47% due in England, Wales and Northern Ireland, worth factoring into any long-term decision.
The Catch: Getting Money Out
This is easy to miss when the comparison stops at Corporation Tax versus Income Tax. Leave profit in the company to reinvest, and the Corporation Tax rate is what you pay. Spend it personally, and you’ll usually take a dividend, taxed on top at 10.75%, 35.75% or 39.35% depending on your Income Tax band, above a £500 allowance.
So the real comparison isn’t 19–25% versus 40–45%, it’s Corporation Tax plus dividend tax (if extracting) against Income Tax on personal ownership, which for landlords drawing most of the income out can end up closer to personal ownership than the headline rate suggests. The advantage is clearest for landlords reinvesting profit or growing a portfolio, rather than needing the income right now.
Mortgage Differences: SPV vs Personal
- Fewer lenders overall, though a growing specialist market, and some now price companies and individuals alike.
- Compare total cost, not just the rate. Rates, fees and products vary by lender, so check the full cost rather than assuming one route is cheaper.
- Personal guarantees are standard, so directors aren’t fully shielded from the mortgage debt despite the company structure.
- Rental cover requirements vary by lender, and can sometimes be more favourable for companies than for higher-rate individual taxpayers, so it isn’t always the harder route to qualify for.
Stamp Duty and Moving an Existing Portfolio In
In England and Northern Ireland, companies generally fall within the higher rates for additional residential property, 5 percentage points above standard bands. A separate 17% rate can apply to company purchases of a single dwelling over £500,000, though relief is available for qualifying property-rental businesses, so this needs specialist tax advice, not assumption. Scotland and Wales use their own property transaction taxes instead.
Moving a property you already own into a company counts as a sale at market value, meaning possible Capital Gains Tax for you and the higher purchase rates for the company. Reliefs may apply depending on your circumstances, so get individual tax and legal advice before any transfer.
Who Tends to Benefit Most?
Rather than just asking which tax rate is lower, look at what you’d keep after mortgage costs, tax going in, extraction tax coming out, and running costs, over however long you plan to hold the property.
On that basis, a limited company tends to suit higher and additional-rate taxpayers with significant borrowing, landlords reinvesting profit, and those buying new properties through a company rather than transferring an existing portfolio in. It suits basic-rate taxpayers, low-borrowing landlords, and those needing most of their income out personally, less well.
Before You Decide
- Work out your real return, not just the headline tax rate: mortgage costs, extraction tax and running costs, and the mortgage side, all need comparing on total cost.
- Speak to a specialist tax adviser. We can work alongside your accountant, but we don’t give tax advice ourselves.
- Get advice before transferring an existing portfolio in, given the Capital Gains Tax and stamp duty implications.
Frequently Asked Questions
Do I need a large portfolio to use an SPV? No. Many landlords set up an SPV for a single property, particularly higher-rate taxpayers with a large mortgage.
Will a limited company always pay less tax overall? Not necessarily. Corporation Tax on rental profit is often lower than Income Tax, but if you extract that profit as a dividend, dividend tax applies on top, which can close the gap.
Is a limited company structure ever the wrong choice? Yes, particularly for basic-rate taxpayers, landlords with little borrowing, or those needing to draw most of their rental income out personally. It isn’t one-size-fits-all.
Getting the Structure Right
Setting up an SPV is straightforward; deciding whether it’s right for you depends on your tax position, your borrowing, and what you plan to do with the income, not the headline rates.
Considering a limited company structure for your next buy-to-let purchase? Our advisers work with portfolio landlords every day and can talk you through the mortgage side, with no upfront fee. Book a free initial conversation with AS Financial.
*Source: Paragon 2025
