You have probably heard that holding buy-to-let through a limited company beats owning in your own name. Then you set up an SPV (a special purpose vehicle, a company that does nothing but hold property), and the first line on your accountant's draft is corporation tax. So what does a property company actually pay, and does the "companies are cheaper" rule of thumb survive contact with the numbers?
The honest answer: sometimes it wins by a lot, sometimes it barely wins, and for some landlords it costs more. It depends on one thing the headlines skip over, which is how you get the money out.
What an SPV pays before you touch the profit
A company pays corporation tax on its taxable rental profit. Unlike an individual, it deducts mortgage interest in full, so Section 24 (the rule that limits interest relief to a 20% credit for individuals) does not bite. That is the genuine advantage.
For the financial year starting 1 April 2026, the rates are unchanged from recent years (gov.uk, corporation tax rates):
- Small profits rate: 19% on profits up to £50,000.
- Main rate: 25% on profits over £250,000.
- Marginal relief in between, which produces an effective rate of about 26.5% on the slice from £50,000 to £250,000.
Most single-property or small SPVs sit comfortably in the 19% band. That already looks better than a higher-rate taxpayer's 40%. But 19% is only the first tax bill.
The associated companies trap
Those thresholds are not per property, they are per company, and they are shared. If you own more than one company (several SPVs, or an SPV plus a trading company), the £50,000 and £250,000 limits are divided by the number of associated companies. Two SPVs means the small profits band drops to £25,000 each, so profit tips into marginal relief sooner. Landlords who set up "one SPV per property" for financing reasons often trip over this without realising.
The second tax bill: taking the money out
Money inside the SPV is the company's, not yours. To spend it personally you extract it, and extraction is taxed again. The common routes:
- Dividends. The first £500 a year is covered by the dividend allowance (gov.uk, tax on dividends). Above that, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate) or 39.35% (additional rate).
- Salary. Deductible for the company but subject to income tax and National Insurance.
- Director's loan repayment. If you lent money into the SPV to fund the deposit, repaying that loan comes back out tax-free. This is genuinely useful and often overlooked.
- Pension contributions. The company can pay into your pension, usually deductible, with tax deferred.
The point is simple. Corporation tax plus dividend tax is two layers. Compare that with an individual, who is taxed once.
Worked example: one property, one landlord
Take an SPV holding a single flat. Figures are illustrative, but the shape is what matters.
| Corporation tax computation | Amount |
|---|---|
| Annual rent (£1,200/month) | £14,400 |
| Less mortgage interest | (£5,400) |
| Less other allowable costs | (£2,000) |
| Taxable profit | £7,000 |
| Corporation tax at 19% | (£1,330) |
| Profit after corporation tax | £5,670 |
If you leave that £5,670 inside the company, you are done. Total tax is £1,330, an effective 19%. That is the best case, and it is why companies suit landlords who reinvest to grow rather than draw an income.
Now suppose you want the cash. You pay it out as a dividend. The first £500 is tax-free; the remaining £5,170 is taxed. Here is how the same £7,000 of profit lands under different routes, with a like-for-like personal comparison under Section 24:
| Scenario | Total tax on £7,000 | Effective rate |
|---|---|---|
| Company, profit retained | £1,330 | 19% |
| Company, fully paid out to a basic-rate shareholder | £1,782 | 25.5% |
| Company, fully paid out to a higher-rate shareholder | £3,075 | 43.9% |
| Personal ownership, basic-rate individual | £1,400 | 20% |
| Personal ownership, higher-rate individual | £3,880 | 55.4% |
(The personal figures apply the 20% mortgage-interest credit rather than a full deduction, per gov.uk's Section 24 worked examples. Higher-rate personal tax is high here because interest is a large share of costs, which is exactly when the company advantage is biggest.)
Read the table honestly
Two things jump out.
For a higher-rate landlord, the company still wins even after extraction (43.9% versus 55.4%). The more you borrow, the wider that gap, because full interest relief is worth most when interest is large.
For a basic-rate landlord, the company can cost more. Paying everything out lands at 25.5% inside a company versus 20% owning personally. The double layer of tax outweighs a benefit that a basic-rate taxpayer barely needed, since Section 24 hurts them far less. If you are a basic-rate taxpayer drawing all the income, an SPV can be the wrong tool.
And the retained-profit line (19%) flatters the company only if you genuinely do not need the money. The day you want it in your own account, that 19% becomes 25.5% or 43.9%.
What actually decides it
The corporation tax rate is the easy part. The decision turns on your marginal income tax band, how much you borrow, whether you need the rent to live on or can reinvest it, and how many companies you already run. There are also running costs a personal let avoids: annual accounts, a corporation tax return, and usually higher accountancy fees of several hundred pounds or more a year, plus buy-to-let company mortgages that tend to price a little higher.
Because the answer flips depending on those inputs, it is worth modelling your own figures rather than trusting a rule of thumb. Padlord's limited company vs personal calculator runs both routes side by side, including the extraction step, so you can see the effective rate for your own income and borrowing before you spend money incorporating.
If you are buying to hold and grow over many years as a higher-rate taxpayer with meaningful borrowing, the SPV route is often the stronger one. If you are a basic-rate taxpayer who wants the income now, do the sum before you assume a company saves you anything.
This is general information, not tax or financial advice. Rates and thresholds change, so check the current gov.uk figures and speak to a qualified accountant about your own position.
