Property Investments: Limited company versus Personal Name

There was a time when personal investments were the go-to option for buy-to-let property purchases. However, since the UK government introduced legislative changes to Section 24, more and more property investors are now choosing SPV (special purchase vehicles) options in the form of limited companies.

With up to 77% of buy-to-let property owners choosing to house their properties under such limited companies rather than their personal investments, it is beneficial to know the differences between the two options. In this blog, we will look at how your property investments can affect your profit margins by considering these specific points: 

  • Tax differences between limited company-owned properties and personally-owned properties 
  • Personally-owned properties 
  • Company-owned properties
  • Benefits of incorporating a mortgage broker

Tax differences between limited company-owned properties and personally-owned properties

Investing in property is trickier than it used to be with the increased regulation, decreasing tax relief and stamp duty changes, many property investors are noticing massive reductions in their rental revenues. 

This is where the option of owning a property investment company becomes attractive, as with the right business structure, your tax payments can be reduced by up to 26% – putting more of your profit into your pocket. Let’s break this down further.

Personally-owned properties

While the tax on personally-owned properties is fairly simple as you would deduct your allowable expenses from your rental income to obtain your profit, it is the profit on which you pay that income tax at your regular rate. Unfortunately, you can’t claim your mortgage interest as an expense on such properties. 

If you are a basic rate taxpayer, income tax is at the basic rate. Of course, this is a very different conversation for higher ratepayers with personal income taxed at a higher rate, who will, in turn, be liable to pay even more tax on their profits. This brings us to option 2, company-owned properties.

Company-owned properties

There is much more flexibility on property tax owned by limited companies. Much like the personally-owned properties, you must deduct the allowable expenses from the rental income to obtain the company profit. However, in this case, mortgage interest payments are able to be offset and will reduce the profit, thus decreasing the amount. In addition to this, you pay corporation tax rather than income tax, and by keeping the profit within the company for company growth, new purchases, and the like, you won’t have any more tax to pay. But how do you access this profit for personal use? 

There are three options here: 

  • Salary 
  • Dividends 
  • Pensions 

Each option comes with its own tax requirements and can be beneficial in the long run. 

So, which of the two options is right for you? This is where you incorporate a mortgage broker.

Benefits of incorporating a mortgage broker

Suppose you are within a lower tax bracket; you will likely be suited to opt for personal property investment. However, suppose that you will exceed the minimum threshold of the lower tax bracket within a year, it will be advisable to consider the limited company option as your tax liability can jump from a basic rate to a higher rate quickly. 

Through detailed analysis and understanding of your personal circumstances, a mortgage broker can advise on the best path for you to take. It may begin on the personal property investment path that grows into a limited company or the other way around. 

Be sure to consult with your trusted broker sooner, as you may find that the right option can increase your rate of returns. Consulting an accountant for clarity on the exact tax liability may also be worthwhile.

You should know that with us, your individually-selected mortgage broker is more than just a salesperson, but someone you can turn to for help and clarity, all with personal confidentiality. 

So ask us all you wish to know about your policies, mortgages, and insurance. This is what we do. We provide independent mortgage and insurance advice and take pride in high-quality customer service and satisfaction. 
We’re here to help you, and you can contact us here for a non-obligatory consult.

We're here to help

Your local independent experts

  • Unbiased advice with access to the entire mortgage and insurance marketplace
  • We offer a free no obligation consultation over the phone or in person
  • We are open six days a week

Call us on 01780 480600

Open today until 6pm

Get in touch


Choice Mortgages have provided me with a fantastic consultative service for over 10 years. I've had absolute peace of mind that everything related to my mortgage, home insurance, life insurance and critical illness insurance has been in hand. Nicki and the team have always given me informed guidance and I've had every confidence in their recommendations and products. A first-class service that I wouldn't hesitate to recommend.

A first-class service that I wouldn't hesitate to recommend.

Emma and her daughter