"Should my next rental go in a company or in my own name?"
That is the real question, and the honest answer is that it depends on two numbers: your marginal income tax rate, and how much mortgage interest the property carries. Get those two right and the decision almost makes itself. The blanket advice you see online ("always use a company", or "companies aren't worth it under four properties") ignores both, which is why it is wrong as often as it is right.
Here is how to find the break-even for one specific property, rather than trusting a rule of thumb.
Why there is no single rule: Section 24
Since April 2020, individual landlords can no longer deduct mortgage interest from rental income. Instead you pay income tax on the full rental profit and receive a 20% basic-rate tax credit for the interest (the Section 24 restriction on tax relief for residential landlords, gov.uk). Companies were never caught by this: they still deduct mortgage interest in full before paying corporation tax.
That single difference is the whole game. It means:
- If you pay basic-rate (20%) income tax, Section 24 barely touches you, because your 20% credit matches your 20% rate.
- If you pay higher-rate (40%) or additional-rate (45%) tax, you are taxed on income you never actually keep, because the interest leaves your account but only earns a 20% credit.
So the company advantage grows with (a) your tax rate and (b) the size of the mortgage. Let's put numbers on it.
The worked example
One property. Assume it lets for £12,000 a year with £3,000 of allowable running costs before finance (letting fees, insurance, repairs, safety checks). That leaves £9,000 of profit before mortgage interest. We will model a higher-rate taxpayer whose salary already uses their personal allowance, basic-rate band and £500 dividend allowance, so their marginal rates are clean: 40% on income, 33.75% on dividends.
For 2026/27, corporation tax is 19% on company profits up to £50,000 (the small profits rate, gov.uk), which covers most single-property companies.
Net cash kept after tax, per year:
| Mortgage interest | Personal (40% taxpayer) | Company, profit retained | Company, profit taken as dividend |
|---|---|---|---|
| £0 | £5,400 | £7,290 | £4,829 |
| £4,000 | £2,200 | £4,050 | £2,683 |
| £6,000 | £600 | £2,430 | £1,610 |
How the personal column is built at £6,000 interest: profit of £9,000 is taxed at 40% (£3,600), less a 20% credit on the £6,000 interest (£1,200), giving £2,400 of tax. Actual cash profit is £9,000 minus £6,000 = £3,000, leaving just £600. The mortgage has quietly turned a real £3,000 profit into a £2,400 tax bill.
Where the break-even actually sits
Two clean results fall out of the maths for a higher-rate taxpayer on this property:
- If you retain the profit in the company (to reinvest, pay down debt or buy the next place), the company wins at essentially every interest level. Even with no mortgage, £7,290 retained beats £5,400 kept personally.
- If you extract every penny as a dividend this year, the company pulls ahead once mortgage interest passes roughly £2,200 on this property. Below that, personal ownership is simpler and slightly cheaper. Above it, the company wins even after dividend tax.
The exact figure scales with the property, but the shape holds: the more debt the property carries, and the more you leave inside the company, the stronger the company case. A cash purchase you want to draw income from now is the classic case where personal ownership still wins.
For a basic-rate taxpayer, none of this bites. Section 24 costs you nothing, and the company's overheads are dead weight, so personal ownership is usually the right call, unless the rental profit itself is what tips you into the higher-rate band.
You can run your own rent, costs and interest through the limited company vs personal buy-to-let calculator to see where your break-even lands.
The costs that do not show up in the yield
A per-property tax win can still be the wrong move once you count the frictions a company brings:
- Higher mortgage rates. Limited-company buy-to-let mortgages typically price above personal ones (at the time of writing, often by around half a point to a full percentage point). On a £150,000 loan, one point is £1,500 a year, which can swallow the tax saving.
- Accountancy and filing. Company accounts, a corporation tax return and a confirmation statement realistically add a few hundred pounds a year.
- Getting money out. Profit inside a company isn't yours until you pay it out, and dividends are taxed again (8.75% / 33.75% / 39.35% for 2026/27). The company wins most clearly when you don't need the income yet.
- Moving an existing property in is a sale. Transferring a personally-owned rental into your company means the company buys it: a 5% SDLT additional-property surcharge (England) on the price, and potentially CGT at 18% / 24% on your gain. That one-off cost often outweighs years of income-tax saving, so companies suit new purchases far more than transfers.
A quick way to decide
- Basic-rate taxpayer, income you want now: usually personal.
- Higher-rate taxpayer, geared property, reinvesting profit to grow: usually company.
- Higher-rate taxpayer, low or no mortgage, drawing all income now: run the numbers, personal often still wins.
- Thinking of moving existing properties in: cost the SDLT and CGT first, it is frequently a dealbreaker.
This is general information, not tax or financial advice. Your other income, your plans for the profit and your mortgage terms all move the break-even, so model your own figures (or ask an accountant) before you buy.
