Limited company vs personal calculator
Whether to hold buy to let personally or through a company turns on your tax rate, your mortgage interest and whether you draw the rent or retain it. Enter your figures to compare the after tax cash both ways, over 5 or 10 years, with the model's caveats in plain sight.
This model compares the after tax cash a buy to let produces held personally against held through a limited company. It applies the Section 24 restriction to the personal scenario, giving relief on mortgage interest as a 20 percent tax credit, and full finance cost relief to the company scenario before corporation tax. Enter the gross annual rent, the annual mortgage interest and other expenses, pick your marginal rate, and choose whether you extract all the profit or retain it in the company. The figures are illustrative and are not a substitute for advice from an accountant.
- Personal, net cash per year£0
- Personal, tax per year£0
- Company, net cash per year£0
- Company, tax per year£0
- Personal, cumulative£0
- Company, cumulative£0
- Difference over the horizon£0
Illustrative only. Not tax advice. Speak to an accountant before you incorporate or move property.
The model makes deliberate simplifications so the comparison stays clear. It assumes corporation tax with marginal relief between the 19 and 25 percent bands, applies the Section 24 20 percent credit to the personal case, uses a single 500 pound dividend allowance in the extract scenario, and ignores your other income, the annual capital gains and dividend allowances beyond that, mortgage capital repayment, and the one off costs of setting up or transferring into a company. It is a directional comparison of ongoing tax, not a full projection, and it is not tax advice. Speak to an accountant about your own position before you decide.
Why the two scenarios diverge
The gap between holding personally and holding in a company is driven almost entirely by two things: your marginal rate of income tax and how much mortgage interest you pay. A basic rate taxpayer keeps full relief on their finance costs and pays 20 percent on the profit, so a company, with its corporation tax and the dividend tax on extraction, often leaves them worse off. A higher or additional rate taxpayer is taxed on the rent before finance costs and given only a 20 percent credit under Section 24, so the more they borrow, the more a company helps, because the company deducts that interest in full before corporation tax.
Extraction is the other lever. If you draw all the company profit out as dividends you pay dividend tax on top of corporation tax, which narrows or reverses the advantage. If you retain the profit in the company at corporation tax rates and reinvest it in the next deposit, the company scenario looks much stronger, because you defer the personal dividend tax until you actually take the cash. Toggle the extract switch above to see how much that single decision moves the answer.
What the model does not decide for you
Tax is one input into the ownership question, not the whole of it. Company mortgage rates and fees run a little higher, the lender panel is smaller, mortgaging and remortgaging carry legal and valuation costs, and unwinding a company later has its own frictions. Against that sit succession planning, the ability to bring in shareholders, and limited liability. Use this to understand the tax direction of travel, then run the borrowing itself through the limited company mortgage calculator, read the criteria on limited company buy to let mortgages, and take advice from an accountant on your own numbers.
Limited company vs personal: common questions
Is it better to buy property through a limited company or personally?
It depends on your marginal rate of income tax, your mortgage interest, and whether you need the rent to live on or can leave it in the company. Since Section 24 restricted mortgage interest relief for individuals to a 20 percent tax credit, a higher rate landlord with meaningful borrowing is often better off in a company, where finance costs stay fully deductible before corporation tax. A basic rate taxpayer with little or no mortgage frequently does better holding personally, because they keep full relief and avoid corporation tax and the cost of extracting profit. This calculator models both so you can see the gap on your figures. It is illustrative, not tax advice.
How does Section 24 affect landlords?
Section 24 phased out the deduction of mortgage interest against rental income for individuals, replacing it with a flat 20 percent tax credit. For a basic rate taxpayer the effect is broadly neutral. For a higher or additional rate taxpayer it is significant: they are taxed on rent before finance costs, then given relief worth only 20 percent, so their effective tax on a geared property rises sharply. Companies were never subject to Section 24 and continue to deduct finance costs in full before corporation tax, which is the main reason higher rate landlords incorporate. The model above applies the 20 percent credit to the personal scenario and full relief to the company scenario.
Do you pay tax twice with a limited company?
You can, if you extract all the profit. The company pays corporation tax on its profit, then if you draw the post tax profit out as dividends you pay dividend tax personally on top, above the small dividend allowance. That double layer is why the calculator lets you toggle between extracting all the profit and retaining it in the company. Many portfolio landlords retain profit inside the company at corporation tax rates and roll it into the next deposit, deferring the dividend tax until they actually need the cash. Retaining changes the comparison materially, which is why it is a switch rather than an assumption.
Should I move my existing properties into a company?
Rarely without careful advice. Moving personally held property into a company is a sale to the company at market value, which can trigger capital gains tax and a fresh stamp duty charge, including the additional dwelling surcharge, so the transaction costs can dwarf the annual tax saving. Some married couples and partnerships can use incorporation relief where the properties are run as a genuine business, but that is a specialist question. This calculator compares holding a new purchase either way. For an existing portfolio, model the switching costs with an accountant before you act.
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Send us the rent, the mortgage and your position. We arrange the finance to fit either structure and work alongside your accountant on the right one.