Buy-to-Let in 2026: Should You Buy Personally or Through a Limited Company?
A practical UK guide to weighing tax, mortgages, admin and long-term plans.
It is the question almost every UK landlord asks at some point: is it better to own buy-to-let property in my own name or through a limited company? Five years on from the full bite of Section 24, and after the additional-property stamp duty surcharge jumped to 5% in October 2024, the answer has shifted decisively for many investors. But the right structure still depends on your income, your borrowing needs, and what you want the portfolio to do for you in 20 years’ time.
This blog post walks through the trade-offs as they stand in the 2026/27 tax year, with a worked example and a side-by-side comparison.
Buying personally
Owning a rental in your own name is the simplest route. You buy the property, the rent lands in your account, and you declare the profit on your self-assessment return. The headline issue, though, is Section 24.
The Section 24 problem
Since April 2020, individual landlords have not been able to deduct mortgage interest from rental income. Instead, you pay income tax on the gross rental profit and then receive a 20% basic-rate tax credit on the finance costs. For a higher-rate (40%) or additional-rate (45%) taxpayer with a leveraged portfolio, this can push effective tax rates above 70% of true cash profit – or even create a tax bill on a property that is loss-making in cash terms.
Where personal ownership still wins
• Mortgages are cheaper and more plentiful. Personal BTL rates are typically 0.5–1.0 percentage points lower than limited-company rates, with fewer arrangement fees.
• Admin is light: one self-assessment return, no company accounts, no Companies House filings.
• On sale you can use your annual Capital Gains Tax exempt amount (£3,000 for 2026/27) and any unused spouse’s allowance.
• If you are a basic-rate taxpayer with little or no mortgage, Section 24 barely affects you and personal ownership is often the cleaner option.
Buying through a limited company
The alternative is to set up a Special Purpose Vehicle (SPV) – a limited company whose only purpose is holding rental property – and buy through that. Roughly two thirds of new BTL purchases now go through a company structure, and for higher-rate taxpayers with mortgages the maths usually speaks for itself.
The tax picture
Companies are not affected by Section 24. Mortgage interest is fully deductible as a business expense, alongside repairs, letting agent fees, insurance and accountancy costs. Whatever is left is taxed at corporation tax rates: 19% on profits up to £50,000, 25% on profits above £250,000, with marginal relief in between. For a portfolio comfortably inside the small-profits band, the effective tax rate on rental profit is roughly the same as a basic-rate individual landlord – but without the Section 24 distortion.
The catch is getting money out of the company. From April 2026 the dividend tax rates rise: 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% above. The dividend allowance stays at £500. Pay yourself a dividend and you are taxed twice – once on the company profit, once on the way out. Leave the money inside the company to repay debt or buy the next property and that second layer disappears, which is why the structure suits investors in growth mode rather than those who need every penny to live on.
Other advantages
• Mortgage interest deductibility means the structure scales with leverage – the more you borrow, the bigger the relative tax win versus personal ownership.
• Shares can be split between spouses or adult children at any ratio you choose, including using alphabet shares for flexible dividends.
• Succession planning is easier: you can gift shares progressively rather than transferring whole properties, and the company itself never “dies”.
• Profits retained in the company can be reinvested without first being filtered through personal income tax.
The trade-offs
• Mortgages are dearer. Expect to budget an extra 0.5–1.0% on the rate and roughly £2,000 in arrangement fees per property. Lenders almost always require personal guarantees from the directors.
• Running costs: annual accounts, a corporation tax return (CT600), a confirmation statement, and accountant fees that typically range from £800–£1,800 a year for a small portfolio.
• No personal CGT allowance on sale. The company pays corporation tax on the full gain, and then you pay dividend tax to extract the proceeds.
• If you incorporate an existing personally-held portfolio, you can trigger both CGT and the 5% SDLT surcharge. Incorporation Relief can defer the gain, but from April 2026 it is no longer automatic – it must be actively claimed and the conditions met carefully.
A worked example
Take a higher-rate-taxpayer landlord with a single property generating £18,000 of rent and £9,000 of mortgage interest, with £2,000 of other costs.
Personally, taxable profit is £16,000 (£18,000 minus the £2,000 of allowable costs). Income tax at 40% is £6,400. They get a 20% basic-rate tax credit on the £9,000 interest, worth £1,800. Net tax: £4,600, leaving £2,400 of cash profit (£7,000 cash minus £4,600 tax).
Through a company, taxable profit is £7,000 (rent minus all costs including interest). Corporation tax at 19% is £1,330. Cash retained in the company: £5,670. If they leave it there to fund the next deposit, that is the end of the story. If they pay it all out as a dividend at 35.75% from April 2026, the personal tax is roughly £1,955, leaving £3,715 in their pocket – still meaningfully ahead of personal ownership, and the gap widens fast as leverage rises.
Other factors worth weighing
• Time horizon: Companies suit long-term, reinvest-and-compound investors. Personal ownership suits those buying one or two properties they may sell within a decade.
• Existing portfolio: Moving personally-held property into a company is expensive. For most existing landlords, it is cheaper to leave older properties in their name and buy new ones through a company.
• Borrowing capacity: Lenders stress-test BTL mortgages on rental cover. Limited-company mortgages are often easier to pass because the tax assumptions are gentler, which can mean more borrowing per property.
• Estate planning: Property in a company is not eligible for Business Property Relief from inheritance tax – a common misconception. But the share structure gives you far more flexibility to gift, freeze value or use trusts.
• Pensions and other income: If rental profit would tip you into a higher tax band, lose your personal allowance (£100,000 threshold) or trigger the High Income Child Benefit Charge, a company can keep that income off your personal tax return.
So which one?
There is no universally right answer, but the broad rule of thumb in 2026 looks like this. If you are a basic-rate taxpayer buying one or two properties without much borrowing, personal ownership is usually still the simplest and cheapest. If you are a higher-rate or additional-rate taxpayer, intend to build a portfolio with leverage, and plan to keep reinvesting for the long term, a limited company will almost always come out ahead – even after the higher mortgage costs and the April 2026 dividend rate rises.
Where it really matters, get a property accountant to model your specific numbers before you commit. The structure you choose at purchase is hard and expensive to change later, and the right decision is the one that fits your tax position, your borrowing plans and the life you want this portfolio to fund.
Making Tax Digital for Income Tax: it's here, and your first deadline is August
If you're a sole trader, a landlord, or some combination of the two, this is the bit of HMRC admin you've probably been pretending wasn't going to happen. Making Tax Digital for Income Tax Self Assessment — MTD ITSA if you're into acronyms, "that quarterly thing" if you're not — went live on the 6th of April. The threats are over. The thing is real. And your first quarterly update is due on the 7th of August, which is roughly twelve weeks from now.
The good news: it is genuinely less scary than the headlines suggest. The slightly less good news: you do actually have to do something about it. Here's the honest version.
Are you actually in scope?
The first thing to work out is whether MTD ITSA applies to you at all. The rule for this April 2026 cohort is simple in principle: if your gross income from self-employment plus property was more than £50,000 in your 2024/25 tax return, you're in. Note the word gross. Not profit. Not net. The headline turnover before any expenses. So if you're a sole trader plumber turning over £45,000 with a small rental flat bringing in £8,000, you're in — because £45,000 plus £8,000 is £53,000, which is more than £50,000.
Both businesses then sit inside MTD. There isn't an option to MTD one and ignore the other.
If you're below £50,000 for now, you've bought yourself either one or two years of breathing room. The £30,000 cohort joins from April 2027, and the £20,000 cohort from April 2028. So almost every UK landlord and sole trader who files a self-assessment will be in scope within the next 24 months. If you'd rather get the software pain over with sooner, you can opt in early — and honestly, knowing what's coming, that's not the worst idea.
Partnerships have been kicked into the long grass indefinitely. If your only self-employment income is a partnership share, you're not in MTD ITSA yet, and HMRC hasn't given a date. But if you're a partner and you have a rental flat earning over the threshold, the rental side gets dragged into MTD — same rule as above.
What's actually changed?
Under the old system, the rhythm was annual. You collected receipts all year, panicked about them in early January, and filed one big self-assessment return by midnight on the 31st. One submission, one deadline, one collective national meltdown.
Under MTD ITSA, that one annual filing becomes five separate submissions a year per business: four quarterly updates plus a final declaration. The quarterly updates are simpler than a full return — they're summaries of income and expenses from your digital records — but they're real submissions to HMRC with real deadlines.
You also need to keep digital records. No more shoebox of receipts. Each transaction has to be recorded in MTD-compatible software, ideally as it happens rather than reconstructed nine months later in a state of panic.
The new rhythm
The four quarterly deadlines are fixed, and they apply to everyone in scope. Submissions are due on the 7th of August, 7th of November, 7th of February and 7th of May, covering the previous three months of trading and property income. (You can elect to use calendar quarters if you'd rather align with the months — that adds five days to each deadline.)
So if you're in the April 2026 cohort, here's what's coming at you:
Quarter 1 (April 6 to July 5, 2026) — submission due 7 August 2026
Quarter 2 (July 6 to October 5, 2026) — submission due 7 November 2026
Quarter 3 (October 6, 2026 to January 5, 2027) — submission due 7 February 2027
Quarter 4 (January 6 to April 5, 2027) — submission due 7 May 2027
Final Declaration — due 31 January 2028
That final declaration is where you pull everything together, add anything that wasn't on a quarterly update (capital gains, gift aid, the bits and pieces), and confirm your total tax position. It replaces the self-assessment return you used to do every January, and it lands on the same date you're used to. So at least there's that.
Software: what you need
MTD ITSA is built around digital record keeping, which means you need MTD-compatible software. HMRC publishes a list, and the names you'll recognise on it include QuickBooks, Xero, FreeAgent, Sage and a stack of smaller alternatives. You can also use bridging software with a spreadsheet — but bridging software has rules of its own and isn't usually the easier path.
If you're starting from scratch, our genuine recommendation is QuickBooks. We're a QuickBooks Pro Partner, which means we can get you a discounted licence and set up your chart of accounts properly so you're not paying for a tool you can't navigate. Day one looks like: open the app, snap a photo of a receipt, done. Quarter end looks like: review the auto-generated summary, confirm it, submit. It's genuinely less work than what you've been doing in January.
What happens if you don't bother?
HMRC has implemented a points-based penalty regime for late MTD submissions. Each missed quarterly update gives you a point. Get to four points within a rolling 24-month window and you start collecting £200 penalties for each subsequent late submission.
There's one piece of mercy: HMRC has said that points won't be issued for quarterly updates in this first year of mandation. So if you miss a Q1 submission in August 2026, you get a strongly-worded letter rather than a points strike. But that grace period ends in April 2027, and the final declaration penalties are in force from day one. Don't take the year-one leniency as permission to wait until 2027 to figure this out.
What you should do this month
If you're confirmed in scope and you haven't already:
Sort out your software. Pick one, get it set up properly with your bank feeds connected, and start using it for everything from April 6 onward. The longer you wait, the more painful Q1 catch-up becomes.
Tell HMRC. There's a sign-up step where you formally enrol your business(es) into MTD ITSA. If you're working with an accountant, they handle this for you.
Decide how you want to handle the quarterly rhythm. Some sole traders are perfectly happy doing it themselves with good software. Others would rather hand the whole thing to an accountant and stop worrying about it. Both are valid. The wrong answer is to do nothing and discover the rhythm halfway through October when you've ignored four months of receipts.
If you're in Hull, East Yorkshire, or anywhere else in the UK and you'd rather not figure this out alone, that is what we do all day. We get you set up on QuickBooks at a discounted rate, file your quarterly updates for you, and do the final declaration as part of your self-assessment package. Fixed monthly fee, no surprises, one named contact who actually picks up the phone.
Book a 15-minute chat and we'll work out what your year-one MTD ITSA setup actually costs you. No pressure, no jargon, no sales pitch — just an honest assessment of your situation.
Rich Port is an ICAS Chartered Accountant and the founder of Port Accounting Services in Hull