There’s no doubt that landlords have faced a series of tax increases in recent years. Many so-called “property experts” argue that the most effective tax-saving strategy is to hold properties through a company. But is that really the case?
Why more landlords are using companies
Press reports suggest that the number of landlords setting up buy-to-let companies has reached its highest level in a decade. More than 66,000 companies were incorporated in 2025, apparently in response to rising mortgage costs and frozen tax thresholds. What Companies House figures cannot show, however, is whether those landlords will actually save tax, and if they do, why.
How profits are taxed
If you focus only on the headline tax rate applied to profits, corporation tax will often appear lower. However, that is only part of the story. Once the income is taken out of the company, personal tax comes into play, and any apparent advantage can easily disappear. In many cases, you may end up worse off. Basic rate taxpayers and non-taxpayers are usually better off owning the properties personally. Equally, if you need to use the rental income as it arises, company ownership is unlikely to be suitable because the overall tax cost is likely to be higher.
How mortgage interest changes the position
One of the main differences between owning property personally and through a company is how mortgage interest is treated for tax purposes. A company can deduct it in full, whereas an individual only receives a tax credit at the basic rate of income tax (currently 20%).
Before deciding whether to use a company, we recommend preparing calculations based on your own circumstances. Our income tax calculator can help with this.
When a company can work better
A company can be more tax efficient where you do not need to draw out the income and can instead leave the profits in the business for future use.
Why growth can be taxed twice
Your longer-term plans for the properties also need to be taken into account. If you intend to sell once they have gone up in value, personal ownership would usually mean capital gains tax at 18% or 24%, whereas a company would pay corporation tax at rates of 19% to 25%. Once again, the difficulty is the extra personal tax that may arise when you take the proceeds out of the company. By contrast, if your plan is to keep the properties and pass them on to the next generation rather than sell them, a company structure may make that easier.
