Buy-to-let used to be straightforward in the UK. You bought a property, you got a mortgage in your own name, you offset the mortgage interest against the rental income, and the rest was taxed as income. The model worked, and for a long time most landlords didn’t think twice about how the property was held.
Over the last decade, that has changed. Section 24 phased out full mortgage interest relief for individual landlords by 2020, the stamp duty surcharge on additional properties has risen, and the loss of full personal allowance for higher-income landlords has stacked up. The result is that more and more UK landlords — particularly higher- and additional-rate taxpayers building a portfolio — now weigh holding property inside a limited company (often called an SPV, or Special Purpose Vehicle) instead.
This article walks through the main differences between the two structures, the mortgage market for each, and the things people most often weigh when deciding which suits their circumstances.
Personal ownership: how it’s taxed
When you hold a buy-to-let in your own name, rental income (after allowable expenses) is added to your other taxable income and taxed at your marginal income tax rate.
Mortgage interest, however, is no longer a deductible expense. Instead, a 20% tax credit is applied against the interest paid. For basic-rate taxpayers, that produces roughly the same outcome as the old relief. For higher- and additional-rate taxpayers, the credit is worth significantly less than the relief used to be, which materially increases the effective tax rate on geared property.
Capital gains on eventual sale are taxed under CGT, currently at higher rates for residential property than for other assets.
Limited company (SPV) ownership: how it’s taxed
When property is held inside a limited company, rental profit is subject to corporation tax rather than income tax. Mortgage interest is a fully deductible business expense. Profit retained in the company is taxed once at corporation tax rates. Money taken out to the shareholder is then subject to dividend tax (or salary tax) at the personal level.
For higher-rate taxpayers who don’t need the rental income personally each year, an SPV often produces a meaningfully different overall tax position. For basic-rate taxpayers, or landlords who do need the cashflow personally, the picture is closer and the trade-off less obvious.
Capital gains on sale by the company are taxed at corporation tax rates, with separate considerations for extracting the proceeds personally afterwards.
What changes in the mortgage market
There are now two distinct buy-to-let mortgage markets in the UK: one for personal name borrowers, one for limited company borrowers. They look similar on the surface, but the underwriting and the pricing have some real differences.
Personal name BTL. Wider lender choice, slightly more competitive headline rates, more transparent product comparison. Affordability is stress-tested against a rental cover ratio of 125–145%, depending on the borrower’s tax band.
Limited company BTL. Narrower lender panel, generally higher headline rates and fees, though the gap has compressed over time. Stress tests are usually applied at 125% rental cover regardless of personal tax band, which can mean larger loans are available for the same rent.
For larger portfolios, dedicated portfolio landlord lenders can underwrite the whole structure rather than treating each property as a standalone case.
Stamp duty and transfer mechanics
Both routes attract the additional residential property stamp duty surcharge. Transferring an existing personal portfolio into a limited company is itself a sale and purchase in HMRC’s eyes — triggering both CGT on the disposal at personal level and stamp duty on the acquisition at company level. That makes incorporation of an existing portfolio expensive and very rarely something to be done without specialist tax advice.
For new purchases going into an SPV from the outset, the surcharge applies but the transfer tax complications don’t.
Other practical differences
A few other points that come up regularly:
- Personal guarantees. Limited company BTL mortgages almost always require personal guarantees from the directors, so the lender does effectively still have recourse to the individuals.
- Administrative burden. Running an SPV means filing accounts, corporation tax returns and confirmation statements every year. The ongoing accountancy cost adds up.
- Inheritance planning. Company shares can be passed to family members in ways that property held personally cannot — relevant for landlords thinking about succession. The rules here can be complex.
- Lender appetite for the director’s wider income. Director-shareholders applying for limited-company BTL still have personal income assessed in many cases — and how lenders treat dividends, retained profit and salary varies enormously.
So when does each structure suit which landlord?
There isn’t a universal answer. Where personal circumstances usually point the conversation includes:
- The landlord’s marginal income tax band, now and projected.
- Whether the rental cashflow is needed personally each year or can be retained and reinvested.
- The intended size of the portfolio and the time horizon.
- The landlord’s overall tax position, including pension contributions and dividend extraction from other sources.
- Estate-planning intentions and the role of property within them.
For some landlords the answer points clearly one way. For others it genuinely sits on a knife-edge, and the structure that wins on tax loses on access to the cashflow, or vice versa. That’s where joined-up advice — tax adviser, accountant and broker — earns its keep.
Where this fits in a wider plan
Buy-to-let strategy works best when it sits inside a wider financial picture: your pension contributions, your personal protection, your tax position, your other investments and your exit horizon. Each pulls on the others.
When my authorisation is in place, helping landlords coordinate that wider picture — alongside the mortgage broking itself — is the conversation I expect to be having most often with serious property investors. Join the waitlist to be first through the door.