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Is it better to put my buy to let property into a Limited company?

My mate says… ‘it’s better to put my buy to let property into a Limited company’.

This is a question we are commonly asked by our clients.

On 6th April 2017 HMRC started to reduce the tax relief available on mortgage interest. The phasing in of this reduced tax relief for higher rate taxpayers began in 2017 and by April 2020 all mortgage interest will only attract basic rate tax relief.

This has increased the number of individuals trying to seek alternative methods to save the additional tax liability they are now facing.

As the restriction doesn’t apply to companies, many landlords have started to wonder whether it might be better to incorporate their property into a Limited company.

Disposing of your property

Transferring the property into a Limited company, will have tax consequences. As you are personally disposing your property to a Limited company, you may have Capital Gains tax to pay on the disposal and Stamp Duty Land Tax.

The deemed sales price will be the market value of the property at the date of disposal. You will be able to deduct your purchase price, enhancement costs and legal fees etc. to calculate your taxable profit on the sale of the property.

There are many areas to consider when calculating Capital Gains Tax and the potential reliefs available. It is always best to seek advice from a qualified tax professional.

Limited company

The limited company will be charged Corporation Tax on the profits from the rental income it has received. Corporation Tax is currently charged at 19%.

Paying yourself from the Limited company

If you would like to take out some funds from the business, you can do so by either paying yourself a dividend or as a salary.

Other considerations

You may find that your costs will increase by using your limited company such as mortgage rates can be higher for properties in a Limited company and due to the additional compliance work required, your accountancy fees may be higher.

You will need to consider the tax implications involved with selling the property from the Limited company. The company will be charged Corporation Tax on the profits arising from the sale of the property and when you extract the funds from the business bank account, you may have a Capital Gains Tax liability.

To summarise there are no concrete rules for how property owners should hold their property. There are many factors to consider, including long-term plans, immediate tax implications and personal income levels.

*Warning* – if you do something just to gain a tax advantage, HMRC may challenge this and seek to clawback the tax advantage.
Change of ownership should be made for commercial reasons only.

Please contact our tax team if you would like to discuss your individual circumstances.

Email: or call us on: 01908 219100

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Posted in: My Mate Says