Limited Company vs Personal Name for Buy-to-Let: Which Is Right for You?

Why This Question Matters More Than Ever

Before 2017, UK landlords could deduct 100% of their mortgage interest costs from their rental income before calculating tax. The Section 24 changes phased this out entirely by 2020, replacing it with a basic rate tax credit. For higher and additional rate taxpayers, this significantly increased the effective tax burden on rental income.

As a result, buying property through a limited company or SPV (Special Purpose Vehicle) has become increasingly attractive. Companies pay corporation tax on profits rather than income tax, and can still deduct mortgage interest in full as a business expense. But the picture isn't simple — limited company buy-to-let mortgages work differently, and the right structure depends heavily on your individual circumstances.

How a Limited Company Buy-to-Let Works

When you buy a rental property through a limited company, the company is the legal owner and the mortgage is in the company's name. Lenders assess the application based on the company's structure, the projected rental income, and the personal financial standing of the directors — who are usually required to provide a personal guarantee.

The most common structure used is an SPV (Special Purpose Vehicle) — a limited company set up solely to hold property, with SIC codes 68100 or 68209. Most lenders prefer SPVs over trading companies for buy-to-let mortgages, as the purpose is clear and straightforward to underwrite.

Key features of limited company buy-to-let mortgages

• The mortgage is in the company's name, not yours personally
• You will typically need to provide a personal guarantee as director
• Rates are generally slightly higher than personal name buy-to-let mortgages
• Fewer lenders offer limited company BTL products, though availability has improved significantly since 2018
• New SPVs with no trading history are accepted by most specialist lenders
• Rental income stress-testing is typically the same as personal name products

Buying in Your Personal Name

A standard buy-to-let mortgage in your personal name remains the simplest and most widely available option. There are more lenders, more product options, and generally slightly lower rates. The application process is more straightforward and there's no company setup or ongoing accounting to manage.

The disadvantage, post-Section 24, is that your rental income is taxed at your marginal income tax rate. For basic rate taxpayers, the impact of Section 24 is relatively limited. For higher rate (40%) and additional rate (45%) taxpayers, the difference can be substantial.

When a personal name mortgage tends to make sense

• You are a basic rate taxpayer (income under £50,270 including rental income)
• You are buying your first rental property and want simplicity
• You intend to sell the property in the near future (transferring to a limited company later triggers Stamp Duty and Capital Gains Tax)
• You want the widest choice of mortgage products and lenders

The Key Tax Differences

In a limited company, profits are subject to Corporation Tax (currently 19–25% depending on profit level). Mortgage interest remains fully deductible. If you want to extract profits as salary or dividends, additional personal tax applies — but there is flexibility in how and when you take income, which can be tax-efficient with the right planning.

In your personal name, rental profits are taxed at your marginal income tax rate after the mortgage interest restriction. For higher-rate taxpayers, this can mean paying tax on income they haven't fully received in cash terms — known colloquially as being taxed on a "phantom profit."

Transferring Existing Properties Into a Limited Company

One of the most important points to understand is that you cannot simply move an existing personally-held property into a limited company without tax consequences. A transfer is treated as a sale for Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT) purposes — even if it's between you and your own company. In many cases, the tax cost makes this impractical.

For this reason, many landlords use a hybrid approach: keeping existing personally-held properties as they are, and purchasing any new acquisitions through a limited company going forward.

Which Structure Is Right for You?

There's no universal answer, but here's a practical summary:

• Basic rate taxpayer, buying first property: Personal name is likely fine. Simpler, more products, lower rates.
• Higher or additional rate taxpayer: A limited company structure is worth serious consideration. Get accountancy advice before you proceed.
• Building a larger portfolio long-term: A limited company gives you more flexibility for reinvesting profits and passing the portfolio on.
• Already have personally-held properties: Transferring them to a company is usually not cost-effective. Consider a hybrid approach for future purchases.

Speaking to a Specialist Broker

Whether you're buying in your personal name or through a limited company, the mortgage market for buy-to-let investors is complex and changes frequently. A specialist buy-to-let mortgage broker — one who focuses exclusively on property investment finance — will know which lenders suit your structure, your portfolio size, and your profile.

They can run whole-of-market searches for both personal and limited company products, model the differences in rate and cost, and guide you through the application process whichever route you choose.