The gap between owning rental property personally and through a limited company is about to widen further. From April 2027, individual landlords will face property specific income tax rates of 22% basic, 42% higher and 47% additional, separated for the first time from standard employment tax bands. For landlords weighing up their structure, the decision now carries more financial weight than ever.
Why This Question Matters Now
Since Section 24 came fully into force in 2020, individual landlords have only been able to claim mortgage interest relief as a 20% basic rate tax credit, regardless of their actual tax bracket. Limited companies were never subject to this restriction and continue to deduct mortgage interest in full before calculating taxable profit. With personal property tax rates rising again in 2027, that gap in treatment becomes even more significant for landlords sitting in the higher or additional rate bands.
How Personal Ownership Works From 2027
Under personal ownership, rental profit is added to other income and taxed at the new property specific bands once the 2027 changes take effect, rising to 22% basic, 42% higher and 47% additional. Mortgage interest still only qualifies for a 20% credit, so a higher rate landlord effectively loses relief on a large portion of their finance costs. Personal ownership remains simpler from an admin perspective and preserves access to the full Capital Gains Tax annual exemption on disposal, though this exemption has already been reduced to £3,000.
Personal ownership tends to suit landlords whose total income including rent stays below £50,000, those with little or no mortgage debt, and anyone planning to sell within the next few years and use their CGT allowance. It also avoids the added running costs of company accounts and Corporation Tax filings, which matters for landlords with only one or two properties.
How a Limited Company Structure Works
A limited company pays Corporation Tax on rental profits instead of Income Tax, at 19% on profits up to £50,000, with marginal relief up to 25% on profits above £250,000. Full mortgage interest deduction remains available regardless of the director’s personal tax bracket, which is the single biggest structural advantage over personal ownership. Profits can also be retained and reinvested inside the company without immediately triggering personal tax, useful for landlords actively growing a portfolio.
The trade off comes when extracting profit. Dividends taken from the company are taxed again at rates up to 33.75%, so the combined Corporation Tax and dividend tax burden needs modelling carefully against personal rates. Company mortgage rates also tend to run 0.5 to 1 percentage point higher than personal buy to let rates, and lenders often require personal guarantees anyway, reducing some of the liability protection landlords expect.
Side by Side Comparison
| Factor | Personal Ownership | Limited Company |
| Tax on profit from 2027 | 22% to 47% property rates | 19% to 25% Corporation Tax |
| Mortgage interest relief | 20% tax credit only | Full deduction |
| Extracting profit | Direct, no extra tax | Dividend tax up to 33.75% |
| Typical accounting fees | £500 to £750 plus VAT per year | £850 to £2,000 plus VAT per year |
| Mortgage rates | Generally lower | 0.5% to 1% higher |
| CGT on sale | 18% or 24%, £3,000 exemption | Corporation Tax on gain, no personal exemption |
| SDLT surcharge | 5% on additional properties | 5% on additional properties |
The Transfer Trap
Landlords considering moving an existing personally held portfolio into a company should be cautious. Transferring property into a limited company usually triggers both Capital Gains Tax on the disposal and full Stamp Duty Land Tax on the “sale” to the company, often making the switch only worthwhile for landlords planning to hold and grow for the long term. For landlords buying new properties, starting in a limited company from day one avoids this problem entirely and is generally the stronger case.
Inheritance Tax and Succession Planning
Beyond income tax, a limited company structure can support more tax efficient succession planning, allowing shares to be passed to family members over time rather than transferring property outright. This becomes more relevant given the tightening of Agricultural and Business Property Relief caps from April 2026, which affects how much relief larger property holdings can claim on death.taxscape.
Which Structure Actually Wins in 2027
There is no single answer. Landlords with modest portfolios, lower income, or plans to sell soon generally keep more money by staying personal, since the accounting is cheaper and CGT reliefs are simpler to access. Landlords with larger, mortgaged portfolios, particularly those already in the higher or additional rate band, will usually come out ahead in a limited company once the 2027 rates apply, provided profits are reinvested rather than drawn out immediately. The right decision depends on income levels, mortgage exposure, growth plans and exit timeline, which is exactly why individual modelling matters more than generic advice.
How UK Property Tax Accountants Can Help
Deciding between personal ownership and a limited company is not a one size fits all calculation, and getting it wrong can be costly once transfer taxes and dividend tax are factored in. At UK Property Tax Accountants, we run detailed side by side projections using your actual portfolio numbers, income, mortgage costs and growth plans, to show exactly which structure keeps more money in your pocket once the 2027 tax rise lands. Our team also handles the practical side, from Corporation Tax filings and MTD compliant bookkeeping to advising on the most tax efficient way to transfer or incorporate an existing portfolio, so you are never left guessing or exposed to an unexpected CGT or SDLT bill. If you are unsure which route suits your situation, book a consultation and we will model both scenarios before you commit to anything.
FAQs
Does Section 24 apply to limited companies?
No. Section 24 only restricts mortgage interest relief for individual landlords. Limited companies deduct mortgage interest in full before calculating Corporation Tax.landlordstudio+1
Will the 2027 tax rise affect landlords who already pay higher rate tax?
Yes. Higher rate landlords will move from 40% to 42% on property income, and additional rate landlords from 45% to 47%, from April 2027.www+1
Is it worth transferring an existing personal portfolio into a limited company?
It depends. Transfers usually trigger CGT and full SDLT, so the benefit needs to be modelled against long term Corporation Tax savings before committing.
What is the Corporation Tax rate for a property limited company in 2026/27?
19% on profits up to £50,000, tapering up to 25% on profits above £250,000, with marginal relief in between.
Can I still use my Capital Gains Tax allowance if I own property through a company?
No. The personal CGT annual exemption only applies to individuals. Company disposals are taxed through Corporation Tax with no equivalent allowance.
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- Personal vs Limited Company: Which Wins the 2027 Property Tax Rise?
- Should You Switch to a Limited Company Before the 2027 Tax Hike?
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- Compare personal ownership and limited company structures ahead of the 2027 property tax rise. See which saves UK landlords more, with expert accounting insight.
