UK landlords are switching to limited companies due to substantial tax advantages. Since 2017, the government has phased out mortgage interest tax relief for individual landlords, while companies can still deduct these costs as business expenses. This has driven a 332% increase in buy-to-let companies since 2016, with two-thirds of rental properties now under corporate ownership. Larger portfolio owners particularly benefit, with company-structured landlords averaging 14.6 properties versus 5.2 for individual owners. The financial benefits clearly outweigh incorporation costs.
Two-thirds of UK rental properties are now held in limited companies, marking a dramatic shift in how landlords structure their investments. The percentage has grown dramatically from just 36% in early 2020 to 66% by the first quarter of 2025. This represents over 680,000 rental properties currently operating under corporate structures rather than personal ownership.
The dramatic shift to limited company ownership reveals a strategic adaptation by UK landlords responding to evolving tax landscapes.
You’ll find that tax considerations are driving this notable change. Since 2017, the government has phased out mortgage interest tax relief for individual landlords. If you own property personally, you’re now limited to a 20% tax credit on mortgage interest. In contrast, limited companies can still deduct mortgage interest as a business expense before calculating tax.
The numbers tell a compelling story. The UK has seen a 332% increase in buy-to-let companies since 2016, reaching 401,744 by February 2025. Last year alone, 46,449 new buy-to-let companies were registered, representing a 23% increase from the previous year. The trend is especially prominent in London and Southeast, which together account for 43% of all buy-to-let companies in the UK.
Limited company ownership appears particularly attractive to landlords with larger portfolios. The average landlord using a company structure owns 14.6 properties, compared to just 5.2 properties for those maintaining personal ownership. This gap highlights the escalating benefits of incorporation as your portfolio grows.
If you’re considering buying investment property, you’re not alone in leaning toward the corporate route. About 60% of landlords planning new purchases intend to buy through limited companies. For new landlords entering the market, the preference is even stronger, with 70-75% choosing company structures for their buy-to-let purchases.
The rental market continues to show healthy performance despite these structural changes. Current rental yields average 6.3%, maintaining profitability through company structures that help offset increasing tax pressures. The significant profitability in the sector is evident with 84% of landlords reporting they are making a profit despite higher operational costs.
While incorporation offers clear tax advantages, you should consider that higher stamp duty and stricter mortgage conditions might slow the growth of new company formations in 2025. Nevertheless, the trend toward limited company ownership represents a fundamental reshaping of the UK’s private rental sector.
Frequently Asked Questions
What Are the Specific Tax Benefits of Limited Company Structures?
You’ll gain several tax advantages through a limited company structure.
You can fully deduct mortgage interest from rental income, unlike the 20% cap for individual landlords.
You’ll pay corporation tax (19-25%) instead of higher income tax rates (up to 45%).
You can split income among shareholders and benefit from tax-free dividends up to £2,000 annually.
Limited companies also offer inheritance tax planning benefits, including potential Business Relief eligibility when transferring shares.
How Much Does Setting up a Limited Company Cost?
Setting up a limited company costs around £12-£100 for basic Companies House registration.
You’ll pay the lower end if you register directly online through the government website.
Additional costs may include accountancy fees (£300-£1,000+ annually), registered office services (£100-£300 per year), and legal advice if needed.
Don’t forget ongoing compliance expenses like filing confirmation statements (£13 online) and preparing annual accounts, which often require professional assistance.
Can Existing Properties Be Transferred to a Limited Company?
Yes, you can transfer existing properties to a limited company. This process requires formal legal conveyancing, including execution of a transfer deed.
Remember, you’ll face tax implications: SDLT on the property’s market value and potential CGT on any gains since purchase.
You’ll need your mortgage lender’s consent if there’s an outstanding loan.
While possible, the transfer involves notable costs and tax considerations that require professional advice before proceeding.
What Mortgage Options Exist for Limited Company Landlords?
As a limited company landlord, you’ll primarily find interest-only mortgages where you pay interest during the term and repay capital at the end.
You can access mortgages through high street banks, specialist lenders, and brokers. Specialist lenders often offer more flexible criteria customized to companies.
Expect minimum deposits of 25-45% depending on your circumstances.
Product terms typically range from 1-5 years, with options available for both first-time and experienced landlords.
Are There Disadvantages to the Limited Company Approach?
Yes, you’ll face several disadvantages with the limited company approach.
You’ll encounter higher mortgage rates and fewer lending options compared to personal buy-to-let mortgages.
You’ll incur additional costs for company setup, annual filings, and accountancy services.
The tax situation becomes more complex, potentially creating double taxation when you extract profits.
You’ll also lose access to personal tax allowances and reliefs that individual landlords enjoy, such as rent-a-room relief and personal CGT exemptions.
