What to know about using a limited company to buy property

Many UK landlords are now using limited companies to buy property, especially for buy-to-let portfolios. In fact, 62% of landlords surveyed plan to set up a UK limited company for new buy-to-let purchases, according to research from 1st Formations on landlords using limited companies to buy property. Buying through a company separates your investment from your personal finances and offers potential tax advantages, but it also entails additional costs and rules.

This guide covers the whole process, from setup and financing to taxes, stamp duty and pros/cons, so you can decide if a company purchase suits your strategy.

Can a limited company buy residential property in the UK?

Yes – a UK limited company can legally purchase and own residential property. When it does, the property belongs to the company (a separate legal entity), not to you personally. This structure is increasingly common among landlords and investors.

Buying through a company means the asset is on the company’s balance sheet. This also means that any debt is the company’s debt.

• Rise in landlords using limited companies to buy properties
• 2024-25 tax guide for UK business owners
• Paying tax on UK rental income as a non-resident landlord

Can you live in a company-owned home?

Buying a property via a limited company is only really suitable for investment purposes, and not for residential use. If you live in the company-owned home, it’s treated as a taxable benefit. The company cannot claim principal private residence relief on the sale, and any personal use must be declared and taxed as a benefit in kind. In practice, most company-owned properties are rented out as investments.

Why do people use a limited company to buy property?

Limited companies buy properties for many reasons, often to expand operations, spread risk, or restructure tax.

Tax efficiency on rental profits

Companies pay Corporation Tax on profits, at a rate of 19-25% depending on profit level. This can be lower than the higher-rate personal income tax (40–45%) on rental income. Crucially, a company can deduct 100% of mortgage interest as an expense, whereas individuals now only receive a basic-rate tax credit.

However, remember that once corporation tax has been paid, the profits remain in the business. If you need to extract the rental profits, you will be subject to additional personal taxes.

Limited liability

Holding property in a company can ring-fence it from personal assets. However, lenders often require personal guarantees. In theory, creditors can only claim the company’s assets.

Succession and investment

You can transfer company shares rather than property deeds. This can simplify passing on wealth or bringing in new investors.

Professional approach

Using an SPV (special-purpose vehicle) dedicated to property simplifies bookkeeping. It also allows you to pool funds (for example, from multiple investors) into one company.

Scale

If you plan a large portfolio, a company makes it easy to add properties under one or multiple corporate SPVs. Bigger landlords find this structure more scalable than holding everything personally.

Pros vs cons of company ownership

To help you decide on whether you should use a limited company to buy property, we have compiled a list of pros and cons that a limited company carries regarding property.

Benefits of buying property through a limited company

Owning property via a company can provide several financial benefits.

Lower tax on profits

Company profits are taxed at Corporation Tax rates. This can be much lower than an individual’s income tax rate on the same profit. For example, a higher-rate taxpayer effectively pays 40% on rental profit, whereas a company pays at most 25%. However, bear in mind that you still need to pay tax if you are extracting income.

Full mortgage interest relief

Companies deduct the entire mortgage interest cost. Individuals only get a 20% tax credit on interest due to recent tax law changes. This difference can significantly boost net yields in high-debt portfolios.

Capital gains planning

When a company sells a property, it pays Corporation Tax on the gain. Companies can use indexation allowance (for pre-2018 holdings) to offset gains. Conversely, individuals face CGT of 18% to 24% on property gains, with just a £3,000 annual exemption from 2024.

Retained earnings flexibility

Profits can remain in the company for reinvestment. You can decide to invest profits in more property rather than paying personal tax immediately. Withdrawals later (via salary or dividends) may be spread out to make better use of allowances and tax bands.

Clear separation of assets

A company hold keeps personal finances distinct. This makes accounting cleaner and can be reassuring if something goes wrong in the property business. Landlords value the ability to deduct mortgage interest fully.

What are the downsides of buying property through a limited company?

Buying a property through a limited company is not always straightforward, and there are several drawbacks to consider. It is not a simple decision, and in some cases, you could end up paying more.

Higher Stamp Duty (SDLT)

Companies face steeper Stamp Duty Land Tax (SDLT) charges on residential purchases. In practice, a UK company buying a house often pays around 22% SDLT on the price (17% flat plus the 5% additional property surcharge). This is significantly higher than for an individual (who would pay up to 17% for a second home).

Tighter mortgage market

Fewer lenders offer limited-company buy-to-let mortgages, often at higher rates, as shown by products from Family Building Society and Leeds Building Society. Getting a company BTL mortgage usually means a 20–25% deposit, possibly a personal guarantee, and a hefty arrangement fee.

Loss of personal tax reliefs

Companies cannot claim Private Residence Relief. Companies also have no CGT annual exemption (individuals get £3k from 2024)

Compliance costs and complexity

Running a company requires annual accounts and tax returns, per HMRC guidance. You’ll need to spend on accounting and legal advice. Industry estimates suggest that small property companies incur accounting costs of £500 to over £2,000 per year, plus incorporation fees.

Stamp Duty for limited company property purchases

Stamp Duty can be a significant issue for limited companies in these scenarios. The regulations surrounding SDLT are particularly stringent for corporate entities purchasing residential properties. As outlined in HMRC’s guidance on Stamp Duty Land Tax for corporate bodies:

• 17% flat rate may apply to certain high-value residential purchases
• An additional property surcharge typically applies
• Higher rates on lower price bands
• Commercial properties use different SDLT rules
• Non-resident surcharge may apply

Companies should budget carefully for this hefty upfront tax.

What type of limited company should you set up for property?

To buy a property with a limited company, most landlords use a private limited company (Ltd) as a dedicated SPV (Special Purpose Vehicle).

This will include:

• Private company limited by shares
• Unique name ending in Ltd – learn how to register a company name
• Property-related SIC code
• At least one director and shareholder
• UK registered office

Once these are set up, you can now consider buying property.

Step-by-step: How to buy property using your limited company

Here is a quick breakdown of how to buy property using your limited company.

1. Set up your property company – (see previous section)
2. Open a business bank account
3. Arrange financing
4. Find and purchase the property
5. Complete the purchase and pay SDLT
6. Maintain corporate accounts – make sure that you are paying the correct tax

Before taking any steps, we strongly recommend seeking professional legal and accounting advice.

Limited company buy-to-let mortgages: What to expect

When a UK limited company buys a rental property, the company itself can borrow the money to finance the purchase. The property is then held and managed by the company, with rental income and expenses flowing through the corporate accounts.

Here is what to expect from buy-to-let mortgages via a limited company.

• Fewer lenders
• Maximum LTV is typically 75%
• Higher interest rates
• Personal guarantees are common
• Rental income stress testing
• SPV structure is often required

A Special Purpose Vehicle (SPV) is often the method which limited companies will choose in this situation. An SPV is a distinct legal entity registered at Companies House that allows a limited company to separate its assets from personal finances, achieve greater tax efficiency, and simplify portfolio management.

Tax implications and capital gains considerations

Before you make any decisions about buying property with your limited company, make sure that you consider all tax implications and do not forget about capital gains tax.

Running a property through a company changes taxation:

• Corporation Tax on profits – GOV.UK rates
• Mortgage interest deductible
• Corporation Tax on gains
• Dividend taxes on extraction
• Transfers trigger SDLT and CGT – see Burlington’s guide on moving property into a company
• ATED filings may apply – HMRC ATED guidance

Before taking any further steps, make sure to get professional legal and accounting advice.

Is this the right route for your property strategy?

Using a limited company to buy a property can be an effective strategy if you are a landlord or looking to purchase property as part of a business move or tax restructuring. However, if you are looking to buy the property personally, using a limited company may not actually give you much of a tax break and, in some cases, could even end up more expensive.

Thinking of buying property through a limited company? At 1st Formations, we help property investors set up the right company structure from day one and handle all the administrative setup for running a business.