Should I move my buy-to-let into a limited company? A contractor landlord's guide for 2026
Direct Answer
For a higher-rate taxpaying contractor landlord, a limited company structure is often more tax-efficient — Section 24 continues to restrict mortgage interest relief for personal landlords, while a company pays full corporation tax (19–25%) rather than 40–45% income tax. But the route is not straightforward: SDLT and CGT costs on transfer, mortgage availability constraints, and the risk of mixing investment and trading activity in your contractor Ltd Co all need careful analysis before you act.
Why more landlords are looking at incorporation in 2026
UK rents have risen close to 9% year-on-year, pushing rental profits — and landlords' tax bills — sharply higher. At the same time, the New Economics Foundation and Joseph Rowntree Foundation have publicly questioned what they describe as "supernormal" landlord profits, increasing the political risk of further restrictions on personal landlords.
Section 24 has been fully phased in since 2020/21: higher-rate taxpayers can no longer deduct mortgage interest against rental income. They receive only a 20% basic-rate tax credit. For a contractor paying 40% or 45% income tax, this means effectively paying tax on gross rent rather than net profit when interest costs are high.
Inside a limited company, mortgage interest remains a fully deductible expense. Corporation tax rates for 2026/27 are 19% on profits up to £50,000, rising to 25% above £250,000 — still significantly below the 40% or 45% that a higher-rate individual landlord pays.
The tax maths: company vs personal ownership
To illustrate: a landlord with £30,000 annual rental income and £15,000 mortgage interest costs faces very different tax outcomes depending on ownership structure.
Personal ownership (40% taxpayer): Section 24 means tax is calculated on the full £30,000, giving a £12,000 income tax liability. The 20% credit on interest (£3,000) brings the bill to £9,000. Net profit after tax and mortgage costs: £6,000.
Limited company: Interest is deductible, leaving £15,000 taxable profit. At 19% corporation tax, the bill is £2,850. Retained profit in the company: £12,150. To extract this as dividends you pay additional tax — but you control the timing, and pension contributions remain an alternative.
The company wins comfortably in this scenario. The margin narrows as profits rise toward the 25% main rate, and as dividend tax (now 10.75% basic, 35.75% higher rate) is applied on extraction.
The costs of transferring existing properties
Moving a property you already own personally into a limited company is treated as a disposal at market value — triggering two potential charges:
- Capital Gains Tax on any gain since purchase (at 18% basic or 24% higher rate for residential property from 2024 onwards)
- Stamp Duty Land Tax at standard rates plus the 3% additional dwellings surcharge — and potentially the 2% non-resident surcharge if applicable
There is no blanket SDLT exemption for property incorporation, so on a £300,000 property the SDLT cost alone can reach £14,000 or more. This payback period against the ongoing tax saving needs careful modelling for each property.
Section 162 TCGA 1992 incorporation relief can defer CGT — but only where HMRC accepts you are carrying on a genuine property business (typically requiring around 20 hours per week of hands-on management, following Ramsay v HMRC). Most landlords with managing agents do not meet this test.
Why your trading Ltd Co is usually the wrong vehicle
Many contractors ask whether they can simply buy or hold property inside their existing contractor limited company. This is possible but usually inadvisable for two reasons:
First, mixing investment property activity with a trading business can cause the company to fail the "trading company" test for Business Asset Disposal Relief (formerly Entrepreneurs' Relief). If more than 20% of the company's assets or income relate to investment activity, BADR may be lost on a future share sale — costing 10 percentage points of CGT relief.
Second, ATED (Annual Tax on Enveloped Dwellings) applies to residential properties worth over £500,000 held in a company with a non-commercial purpose. The annual charge starts at £4,400 and rises steeply. Proper planning can mitigate this but it adds compliance cost.
A separate Special Purpose Vehicle (SPV) company — set up solely to hold property — is the cleaner route for most contractor landlords.
Mortgages inside a limited company: what to expect
Most high-street residential mortgage lenders will not lend to an SPV limited company. Specialist BTL lenders — including Paragon, Fleet Mortgages, and some challenger banks — do offer SPV mortgages, but typically at a rate premium of 50–75 basis points over equivalent personal BTL rates.
If you are refinancing or buying a new property inside a company, stress-testing your cash flow at current rates — and at rates 2–3% higher — is essential. A broker who specialises in SPV BTL lending will be needed; generalist mortgage brokers often cannot place this business.
Director's guarantees are standard: lenders will require you to personally guarantee the company's mortgage, so your personal credit is still at risk.
Ongoing compliance: what running a property Ltd Co involves
A property SPV limited company has full Companies House obligations: annual confirmation statement, statutory accounts filed at Companies House, and corporation tax return filed with HMRC. If it is VAT-registered it will also have quarterly VAT returns, though residential lettings are exempt from VAT so most property SPVs are not registered.
Director's loan accounts need careful monitoring if you move cash between the company and personal accounts. A positive DLA (company owes you money) is straightforward; a negative DLA (you owe the company) triggers the s.455 tax charge if not repaid within nine months of the year-end, and a benefit-in-kind on loans over £10,000.
For contractors with both a trading Ltd Co and a property SPV, having a single accountant manage both structures is the most efficient approach — intercompany transactions, director's loan accounts and year-end dividend planning all need to be coordinated.
Considering moving your buy-to-let into a limited company?
Book a free call with an AutoBooks contractor accountant — £89+VAT/month gets you year-round support on Ltd Co structuring, tax planning and HMRC compliance.