Corporate vs personal buy-to-let in the UK: the 2026 cost stack
Two landlords buy the same £250,000 flat. One puts it in their own name. The other puts it in a limited company they own outright. They pay the same stamp duty surcharge at completion — but from year two onwards, their tax bills diverge sharply, and at exit they leave with very different cheques.
The structural choice between personal and corporate buy-to-let drives roughly five separate cost layers: entry tax, ongoing tax on rental income, financing, an annual property tax that only applies to companies above a threshold, and exit tax. None of those layers is dominant on its own — but stacked together, they shape the economics of every UK rental purchase made above the smallest scale.
This piece walks each layer through with current 2026 rules and a worked example. It is factual mechanics, not a recommendation: the right vehicle depends on a buyer's marginal income-tax band, LTV, holding horizon, ownership structure, and intentions for profit extraction. Speak to a qualified tax adviser before acting.
Layer 1 — Stamp Duty at completion
The headline change since 31 October 2024 is that the Higher Rates for Additional Dwellings (HRAD) surcharge sits at 5% for both individuals buying additional dwellings and companies buying any dwelling (HMRC, SDLT manual). For purchases at £250,000 in England:
| Buyer | Standard slabs | Surcharge | Total SDLT |
|---|---|---|---|
| Individual main residence | £2,500 | — | £2,500 |
| Individual additional dwelling | £2,500 | £12,500 | £15,000 |
| Company (any dwelling) | £2,500 | £12,500 | £15,000 |
At £250,000, individual investor and company face an identical bill. The mechanics part ways above £500,000.
A company buying a dwelling above £500,000 that is not used as a qualifying property rental business is taxed at a flat 17% on the entire purchase price under FA 2003 Schedule 4A. The "genuine rental business" relief in paragraph 5 of that Schedule restores the normal slab + 5% surcharge calculation — but the relief must be claimed, the company must hold and let the property at arm's length to unconnected parties, and HMRC can claw back the relief if the property is later used personally within three years.
Layer 2 — Annual property tax above £500,000 (companies only)
A company that holds a UK dwelling worth more than £500,000 is in scope of the Annual Tax on Enveloped Dwellings (ATED) — a single fixed annual charge banded by property value (HMRC, ATED technical guidance). The 2025-26 bands run from £4,400 a year (properties valued £500,001-£1 million) to £292,350 (properties over £20 million).
A genuine commercial property rental business can claim property rental relief and reduce the charge to nil — but the company still has to file the ATED return every year with HMRC; missing the deadline triggers automatic penalties even when the relief takes the bill to zero. Individuals never face ATED.
Layer 3 — Financing: the Section 24 split
This is the biggest mechanical divergence between the two vehicles. Finance Act 2016 Section 24 restricted the way individual landlords deduct mortgage interest. Since 6 April 2020, residential landlords cannot deduct mortgage interest as an expense against rental income; instead they get a 20% basic-rate tax credit on the interest figure.
For a higher-rate or additional-rate taxpayer this is a material drag. Companies sit entirely outside Section 24 — interest on a limited-company buy-to-let mortgage is a normal business expense, deducted in full before corporation tax is calculated.
Mortgage rates themselves are also higher for companies. The Bank of England's quoted-rate series (75LTV5Y) sat at 4.32% in April 2026, down from 4.51% in November 2025 (BoE statistical release). Buy-to-let products typically price 0.7-1.2 percentage points above that, and limited-company products price a further 0.3-0.6 percentage points above personal buy-to-let. A handful of specialist lenders — Paragon, Aldermore, Kent Reliance, Birmingham Midshires, Landbay — dominate limited-company BTL; they are named here as market participants, not as a comparison.
Layer 4 — Tax on rental profit
The headline rates:
| Profit tax | Threshold (2026-27) | Rate |
|---|---|---|
| Individual: basic rate | up to £50,270 total taxable income | 20% |
| Individual: higher rate | £50,271-£125,140 | 40% |
| Individual: additional rate | over £125,140 | 45% |
| Company: small profits rate | profits up to £50,000 | 19% |
| Company: marginal relief band | £50,001-£250,000 | tapered 19→25% |
| Company: main rate | over £250,000 | 25% |
Sources: HMRC income tax rates and corporation tax rates.
The raw rates make corporate ownership look attractive, but there are two important offsets:
- Corporate profits are taxed twice if extracted as dividends. Above the £500 dividend allowance, dividends are taxed at 8.75% (basic), 33.75% (higher) or 39.35% (additional). A higher-rate-band company-owner taking all the rental profit as dividends faces a combined effective rate (25% + 33.75% × 75%) above what they would have paid as an individual basic-rate taxpayer.
- A company that retains profit to fund the next deposit, or to pay down debt, avoids the second layer entirely while the equity is reinvested. The vehicle's edge grows with how long profit stays inside the company.
Layer 5 — Exit tax
When the property is sold:
- Individuals pay Capital Gains Tax on residential property at 18% (basic-rate band) or 24% (higher-rate band) for disposals from 30 October 2024 onwards (HMRC, CGT rates). The annual CGT exempt amount is £3,000 in 2026-27.
- Companies pay corporation tax on chargeable gains at the same 19-25% scale as on income, with indexation allowance frozen at December 2017. There is no annual exempt amount. To get the after-tax cash out of the company, the owner then pays dividend tax on the extraction.
A common stumbling block: moving an existing personally-owned buy-to-let into a limited company is a tax event, not a tax-neutral re-registration. The transfer crystallises CGT on the personal owner and triggers a fresh SDLT charge (with the 5% surcharge) on the company. Section 162 TCGA 1992 "incorporation relief" can defer the CGT, but typically requires a genuine partnership of two or more landlords running the lettings as a business — solo landlords rarely qualify.
Worked example: a £250,000 flat in a B1 postcode
The Birmingham city-centre flat market is a useful benchmark — Land Registry data shows 233 completed transactions in the B1 postcode area during 2025 at a mean of £222,000 (HM Land Registry Price Paid, queried 2026-05-18). A two-bed flat at £250,000 with a typical rent of £14,400 a year, 75% LTV mortgage at year-one rates, looks like this:
| Year-1 line | Individual (higher-rate) | Limited company |
|---|---|---|
| SDLT at completion | £15,000 | £15,000 |
| Mortgage interest (5.3% / 5.7% on £187,500) | £9,938 | £10,688 |
| Letting agent fee (10% of rent) | £1,440 | £1,440 |
| Insurance + maintenance + service charge | £2,200 | £2,200 |
| Accountancy filing | — | ~£400 |
| Taxable rental profit before finance cost | £10,760 | n/a |
| Less: deductible interest | — | £10,688 |
| Taxable profit | £10,760 | -£72 (loss) |
| Tax due | £2,316 (40% less 20% credit on £9,938) | £0 (loss carried forward) |
| Net cash after year-1 tax | -£1,494 | -£472 |
At this LTV and current Bank of England-quoted financing rates, both structures show a year-1 cash loss, but the higher-rate individual loses more because Section 24 disallows the interest deduction. A basic-rate individual would owe roughly £164 of tax on the same numbers and be modestly cash-positive; a lower-LTV deal (say 50%) puts the personal vehicle back into clear positive territory for any tax band.
The takeaway is not "always incorporate". It is that the vehicle interacts with leverage and tax band — and the heavier the leverage, the more painful Section 24 becomes for the personal route.
Costs the headline analysis usually ignores
- Accountancy. A limited-company BTL needs filed accounts and a CT600 — budget £300-£600 a year for a single-property SPV; more for multi-property holdings.
- Mortgage market depth. Choice is narrower for limited-company products; rates are typically priced higher, and many specialist lenders require directors' personal guarantees.
- Profit extraction. If the goal is to spend the rent, the dividend-tax layer often closes much of the corporation-tax saving — particularly for higher-rate owners.
- Refinancing on company assets. Some lenders treat company-held property differently when the borrower's circumstances change (e.g. an owner exiting the company); this affects remortgage flexibility on a 25-year horizon.
What this means for a buyer
Use Homecost to model the property side first — purchase price, council tax, energy from the EPC, mortgage payments at the current BoE-quoted rate. Try a postcode like B1 1AA in Birmingham (a flat-heavy city-centre buy-to-let market) and look at the price-paid and energy-rating data on the page.
Then layer the ownership vehicle on top using a tax adviser. The data Homecost surfaces does not change between personal and corporate ownership; the tax layered on top of that data does. Related cost mechanics:
- The full cost of a UK buy-to-let property in 2026 — the all-in line-item breakdown
- Additional property stamp duty surcharge explained — the 5% mechanics in detail
- Stamp duty for non-UK residents — the further 2% surcharge layer that stacks on top for non-resident buyers, including non-resident companies
- More cost-intelligence guides
Based on 848,775 Land Registry transactions completed in 2025 and 39 monthly BoE quoted-rate records.
This is general information, not advice. The choice between personal and corporate ownership has tax, legal, financing and inheritance consequences that depend on individual circumstances. Speak to a qualified tax adviser before acting.