Should you buy property personally or through a limited company?

What's the difference?

If you buy a rental property in your own name, any profit you make from renting it out is treated as personal income, so you'll pay Income Tax on it.

But things can get a little more complicated, particularly if you have a mortgage. When you own a residential rental property personally, you can't deduct your mortgage interest from your rental income before calculating your taxable profit. Instead, you receive a tax reduction worth 20% of your qualifying mortgage interest costs (for 2026/27), subject to certain limits.

This can make quite a difference, especially if you're a higher rate taxpayer. You could end up paying tax on a much larger amount than the rental income you have left after paying your mortgage interest.

So, what changes if you buy through a limited company?

A limited company can generally deduct mortgage interest as a business expense before calculating its taxable profit. This means the company pays tax on the profit left after those interest costs have been taken into account.

Instead of Income Tax, the company pays Corporation Tax. For 2026/27, these rates are:

• 19% for companies qualifying for the small profits rate.
• 25% for companies paying the main rate.
• 19% - 25% where marginal relief applies, depending on the company's profits and circumstances.

This can make buying through a limited company more appealing, particularly if you have a mortgage and plan to use the rental profits to invest in more properties.

There is just one more thing to consider. Money earned by your limited company belongs to the company, not to you. If you want to take those profits out for personal use (for example, through dividends) you may have to pay additional personal tax.

So while a limited company might look like the cheaper option at first glance, that's not always the case once everything is taken into account. The key is to look at how much money you'll actually keep after all the relevant taxes have been paid, rather than simply comparing Income Tax and Corporation Tax rates.

Don’t forget the cost of buying and selling

Buying through a limited company doesn't mean you can avoid Stamp Duty. In fact, companies generally pay the higher rate of Stamp Duty Land Tax (SDLT) when purchasing residential property.

These higher rates are essentially an extra charge on top of the standard Stamp Duty rates, usually applied when buying additional properties, such as buy-to-lets or second homes.

There's also a separate 17% Stamp Duty charge that can apply to certain company purchases of residential properties worth more than £500,000. The good news is that qualifying property rental businesses may be exempt from this charge, although the usual higher Stamp Duty rate can still apply.

What happens when you eventually sell?

If you own an investment property personally, any taxable profit you make when selling it is generally subject to Capital Gains Tax (CGT) at 18% or 24%, depending on your income and the size of the gain. You also have a £3,000 annual CGT allowance for 2026/27.

If a limited company sells the property instead, the gain is subject to Corporation Tax. And if you then want to take that money out of the company for personal use, there could be another tax bill to consider.

The takeaway here, is don't just look at how much rental income you'll keep each year. Think about the costs of buying, owning AND eventually selling the property before deciding which route works best for you.

Already own property?

Moving a property you already own into a limited company isn't quite as simple as just changing the name on the paperwork.

Even if you own the company, HMRC treats you and your business as two separate entities. So, transferring a property between the two is generally treated much like a normal sale.

This means you could have Capital Gains Tax to pay on any increase in the property's value, while your company could also face a Stamp Duty bill.

Here's the catch: HMRC generally calculates these taxes using the property's current market value, even if no money changes hands.

This prevents people from avoiding tax by transferring properties to their own companies for a nominal amount. Of course, there are reliefs that may help reduce or delay these tax bills, which we'll look at next.

Can Incorporation Relief help with Capital Gains Tax?

Potentially, yes!

If you're transferring an existing property business into a limited company, you may qualify for something called ‘Incorporation Relief’. Put simply, this allows you to delay paying some (or all) of the Capital Gains Tax that would normally arise when transferring the business.

There are a few conditions to meet, though. For the business to qualify for the relief, it generally needs to be transferred in full as an ongoing business, and you must receive shares in the company as part of the transfer.

It's worth remembering that the tax doesn't just disappear here. Instead, the gain is carried forward and can affect the tax you pay if you eventually sell your shares.

This doesn’t necessarily apply to every landlord. HMRC looks at how much work goes into running your property business, how regularly you're involved and how actively you manage it. There's no magic number of properties that automatically qualifies you, so it's important to look at your individual circumstances before assuming the relief applies.

For transfers from 6 April 2026, you'll also need to formally claim the relief.

What about a partnership or LLP?

For some established property businesses, a partnership or limited liability partnership (LLP) could offer another route into company ownership, potentially with some tax savings.

Special Stamp Duty rules mean that, in certain circumstances, transferring properties from a qualifying partnership into a limited company could result in a reduced Stamp Duty bill, or even none at all.

If the business also qualifies for Incorporation Relief, it may be possible to delay paying Capital Gains Tax, too.

Sounds good, right? But there are a few catches!

Simply owning property with someone else doesn't automatically make you a partnership. And setting one up before transferring properties into a company could itself trigger tax bills.

HMRC recognises these arrangements when they meet the relevant conditions, but not every scheme promising tax savings will qualify.

It's an option worth exploring, but the business must be genuine and the whole process needs careful planning. Getting advice before making any changes is essential – and Hatch can help with this.

So, what's the best option for you?

As we've seen, there's no 'one size fits all' answer when it comes to buying property personally or through a limited company. Both options have their advantages, and what works best will depend on your circumstances, your finances and what you're hoping to achieve.

It's not just about how much tax you'll pay on your rental income. You'll also need to think about the costs of buying and selling, whether you plan to re-invest your profits, and what happens if you decide to move properties you already own into a company.

While there are tax reliefs that could make certain options more attractive, it's important to understand the full picture before making any big decisions.

At Hatch, we can help you make sense of the numbers, explore your options and understand the potential tax implications, so you can make a decision that works for your circumstances.

Get in touch with the team hello@hatchaccountancy.com or book a catch-up directly with me, Lloyd, by clicking here and let's have a chat about your next steps.

A note on the figures: This article focuses on residential letting and SDLT in England and Northern Ireland. Rates quoted are for 2026/27. From 6 April 2027, separate property income tax rates of 22%, 42% and 47% are scheduled, with finance-cost relief at the property basic rate of 22%. Transfers need advice based on the specific circumstances.