Comparing Individual Ownership v Limited Company Buy to Let Property Purchase

Individual  BTL

Limited Company BTL

Purchase

Buy to Let Mortgage and Borrowing

Easier if you have excess income or if rental income will exceed mortgage interest payments.  Verdict: Winner

It is more complex and therefore more difficult for a new limited company to borrow money.  Interest rates are usually higher but more lenders are entering the Limited Company BTL market.  Verdict: Loser

Stamp Duty Land Tax (SDLT) Payable

Normal stamp duty rates with a 5% additional levy on 2^nd/Additional property purchases.

If 6 or more properties in one sale contract, lower commercial rates may apply.

Verdict: Draw

Normal stamp duty rates with a 5% additional levy on purchases by corporate entities.

If 6 or more properties in one sale contract, lower commercial rates may apply.

If 6 or more properties in different contracts, lower commercial rates may apply with same lender.

Verdict: Draw

Ongoing Costs, Liability and Administration

Interest Expenses Relief against Tax

Mortgage interest can no longer be offset against your highest rate of income tax.  Instead, a tax credit of 20% of total interest paid is credited.  In effect, 20% relief.   Rental income when added to earned or pension income has already taken many landlords into the 40% higher rate tax bracket but now only 20% credit is given.

Verdict: Loser

Limited companies can continue to fully offset mortgage interest expenses at corporation tax rates of 19% (profit below £50k), 26.5% (profits between £50k - £250k), and 25% (profit over £250k).

Verdict: Winner

Tax Liability on Profit

Individual Taxation meaning income tax is payable at your highest rates of income tax: Verdict: Loser 20%, 40% or 45%.

Limited company corporation tax rates of 19% (profit below £50k), 26.5% (profits between £50k - £250k), and 25% (profit over £250k).

Verdict: Winner

Taxes on Net Profits Distributed

There are no further taxes to pay as full income tax has been paid

Verdict: Winner (but may only be better for smaller property portfolios)

In addition to corporation taxes already paid, profits can be distributed as employed PAYE income meaning normal rates of income tax apply but PAYE is full offset against expense.

Profits can alternatively be distributed as dividends, meaning a £500 tax free dividend allowance and then dividend taxation rates of  8.75% (dividend within 20% basic rate tax band), 33.75% (dividend within 40% higher rate tax band)) and 39.35% (dividend within 45% additional rate tax band) i.e., lower taxes.

Verdict: Loser (but also a Winner if you have a larger property portfolio as dividend taxes are lower than income taxes and you can control when they are distributed over different tax years).

Administration

Rental income profit included in Annual Self Assessment returns currently.

Verdict: Winner

From 2026, 2027 and 2028, more and more landlords will be required to comply with Making Tax Digital (MTD) with quarterly returns and an annual return as well as Annual Self Assessment returns for the individual.

Verdict: Draw (from 2026/27)

Quarterly VAT Returns (if above VAT threshold) plus annual corporation tax returns and a Companies House return as well as Annual Self Assessment returns for the individual taking dividends.

Verdict: Loser but Draw (from 2026/27 when MTD starts for private/individual landlords)

Annual Property Taxes

There are no further annual property taxes.

Verdict: Winner

For individual properties worth £500,000 or more, an Annual Tax on Enveloped Dwellings (ATED) is payable to compensate for the fact that on sale, limited company shares can be sold (rather than the property) with no stamp duty paid by the new owner whereas for individual ownership, the new buyer will pay stamp duty.

Verdict: Loser

Protection from Creditors

None.  For individual owners, all assets can be included for any legal action or becoming insolvent/filing for bankruptcy.

Verdict: Loser

A limited company is a separate legal entity to the individual meaning that if the individual is sued, individual shares may be forced to be sold/liquidated in the company to sell assets but

If the legal action/insolvency is for the Limited Company and property within it, the individual’s personal assets are protected and only the limited company assets are at risk.

Verdict: Winner

Pension Contributions

Profits from individual ownerships are not relevant UK earnings and therefore not pensionable.

Verdict: Loser

A limited company has an unlimited interest in the well being of it’s shareholding directors and as part of any company management expenses, the limited company (employer) can make reasonable pension contributions for a director.

Verdict: Winner

Selling Up

Sale of Property

If a gain is made after deduction of CGT annual allowance, CGT is payable at 18% if gain is withing basic rate tax band and 24% is gain is within higher rate or additional rate tax band.

Verdict: Draw

Limited company does pay capital gains tax but pays corporation taxes on profits at 19%, 26.5% or 25%.

Verdict: Draw

Cash Distribution after Sale

No further taxes payable by the individual as CGT has been paid.

Verdict: Winner

Distributions payable as dividends.  Therefore, after dividend allowance (£500), profits distributed after sale or if a full liquidation/dissolution of the company occurs, Business Asset Disposal Relief is usually not available and full dividend taxes of 8.75%, 33.75% and 39.35% are payable.

Verdict: Loser

Inheritance Tax (IHT)

IHT on Death

Agricultural and Business Property relief does not usually apply to residential property.  Therefore, the full value of the property less mortgage/debt will be included in the estate for IHT.

Verdict: Draw

Agricultural and Business Property relief does not usually apply to investment companies unless most of the revenue/trade for the limited company is other real trading/business activities.  Therefore, the full value of the shares in the limited company will be included in the estate for IHT.

Verdict: Draw

IHT Mitigation and Planning

Gifting a share of the investment property involves a change of the proprietary ownership at the land registry.  This is relatively simple (provided not mortgage in place).  The transfer of value may be subject to capital gains taxes, and any gift also becomes a Potentially Exempt Transfer (PET), where you need to survive for 7 years after the gift for it to fall outside the estate for IHT.

Verdict: Draw

Gifting shares in the limited company is relatively simple.  The transfer of share value may be subject to capital gains taxes, and any gift also becomes a Potentially Exempt Transfer (PET), where you need to survive for 7 years after the gift for it to fall outside the estate for IHT.

Verdict: Draw

Overall

Wins: 4

Wins: 4