Limited Company Buy-to-Let Calculator 2026/27 — Ltd vs Personal Tax

Section 24 and Why Landlords Incorporate

For most of the last decade, the single biggest force pushing UK landlords towards limited companies has been Section 24 of the Finance (No. 2) Act 2015 — often called the “tenant tax” or the mortgage interest relief restriction. Before Section 24, an individual landlord simply deducted mortgage interest from rental income and paid tax on the profit, exactly like any other business. Section 24 changed that for residential property held personally.

The restriction was phased in from 6 April 2017 and has been fully in force since 6 April 2020. Today, an individual landlord can no longer deduct finance costs (mortgage interest, and the interest element of certain loans and overdrafts) from rental income. Instead, you pay income tax on the full rental profit before interest, and then receive a basic-rate tax reduction worth 20% of your finance costs. For a basic-rate taxpayer this is broadly neutral, but for a higher-rate (40%) or additional-rate (45%) taxpayer the effect is severe: you are taxed at your marginal rate on income you never really kept, while only getting relief at 20%.

There is a further sting. Because the full rent (not the post-interest profit) is added to your income, Section 24 can push you into a higher tax band, reduce or remove your Personal Allowance (which tapers away above £100,000), trigger the High Income Child Benefit Charge, or affect student loan repayments. A heavily-mortgaged landlord can end up paying more tax than they make in profit.

Crucially, Section 24 does not apply to companies. A limited company deducts mortgage interest in full as a normal business expense before calculating its taxable profit. That single difference is the main reason hundreds of thousands of landlords have incorporated or now buy new property through a company. The trade-off, as the calculator above shows, is a second layer of tax when you take the money out. Use our buy-to-let stress test calculator to check whether your rent covers the lender’s interest-cover ratio, and our rental yield calculator to assess the underlying return.

How the Limited Company Route Is Taxed

When a property is owned by a limited company (typically a Special Purpose Vehicle, or SPV, with the right SIC codes for property letting), the tax journey has two stages: corporation tax inside the company, and then personal tax if and when you extract the profit.

Stage 1 — Corporation tax. The company adds up its rental income and deducts all allowable costs, including mortgage interest in full, letting agent fees, repairs, insurance and accountancy. The remaining profit is taxed at corporation tax rates. For the financial year beginning 1 April 2026 (unchanged from April 2025), these are:

• Small profits rate — 19% on taxable profits up to £50,000.
• Main rate — 25% on taxable profits over £250,000.
• Marginal Relief for profits between £50,000 and £250,000, using the standard fraction of 3/200. This produces an effective rate that climbs smoothly from 19% to 25% — the slice of profit between the two limits is effectively taxed at a marginal 26.5%.

Note that the £50,000 and £250,000 limits are divided between “associated companies” — if you own several property companies, the limits are shared, which can quietly push more profit into the marginal band. Most single-property and small-portfolio SPVs comfortably sit within the 19% band. You can model the company-level tax in isolation with our corporation tax calculator.

Stage 2 — Getting the money out. Profit left in the company is only taxed once (at corporation tax) and can be reinvested in more property — which is why portfolio landlords building for the long term often favour the company structure. But money you draw out personally as dividends is taxed again. After the £500 dividend allowance (2026/27), dividends are taxed at 8.75% in the basic-rate band, 33.75% in the higher-rate band and 39.35% in the additional-rate band. The calculator above lets you toggle between taking all profit as dividends and leaving it in the company, so you can see how much that second layer costs you.

Worked Example: Higher-Rate Landlord, 2026/27

Imagine a higher-rate (40%) taxpayer with one mortgaged buy-to-let. The figures: £18,000 annual rent, £7,000 mortgage interest, and £2,500 of other allowable costs (letting fees, repairs, insurance). The rental profit before interest is £18,000 − £2,500 = £15,500.

Held personally. Under Section 24, the £7,000 interest is not deductible. Income tax at 40% on the £15,500 profit is £6,200. You then receive a 20% tax reduction on the £7,000 interest = £1,400. Total tax is £6,200 − £1,400 = £4,800. Your real economic profit is rent − costs − interest = £18,000 − £2,500 − £7,000 = £8,500, so your net income after tax is £8,500 − £4,800 = £3,700.

Held via a limited company. The company deducts the £7,000 interest in full, so taxable profit is £18,000 − £2,500 − £7,000 = £8,500. Corporation tax at 19% (well within the small profits rate) is £1,615, leaving £6,885 in the company. If you extract all of that as dividends, the first £500 is covered by the dividend allowance and the remaining £6,385 is taxed at the higher dividend rate of 33.75% = £2,155. Net in your hand: £6,885 − £2,155 = £4,730. That is roughly £1,030 a year better than holding personally — and if you instead leave the £6,885 in the company to buy more property, you have £3,185 more working capital than the personal route’s £3,700, deferring the dividend tax entirely.

This is exactly the pattern the calculator reproduces: the more mortgage interest you carry and the higher your tax band, the more the limited company wins. Swap in your own numbers above to see your figure. Remember these are ongoing-tax figures only — the one-off costs of moving an existing property into a company are covered next.

Incorporation Costs, SDLT and CGT — the Caveats

The ongoing-tax comparison only tells half the story. Moving an existing personally-owned property into a company is treated by HMRC as a sale at market value, which can trigger significant one-off costs that wipe out years of annual savings. Before you incorporate, weigh up the following:

Capital Gains Tax (CGT). Disposing of the property to your company crystallises any gain since you bought it. For 2026/27 the residential property CGT rate is 18% for gains within the basic-rate band and 24% for higher-rate taxpayers, after the annual exempt amount (just £3,000). On a property that has risen £80,000 in value, a higher-rate landlord could face roughly £18,000 of CGT. Our capital gains tax property calculator estimates this. Incorporation Relief may defer the gain if you transfer a genuine property business as a going concern, but HMRC’s conditions are strict and partnership structures are often needed.

Stamp Duty Land Tax (SDLT). Because the company is a separate legal person buying the property, it pays SDLT on the market value — and as a company acquiring an additional dwelling, it pays the higher rates with the 5% surcharge on top (and the flat 17% rate applies to corporate purchases of dwellings over £500,000 unless a relief applies). Estimate this with our stamp duty calculator. On a £250,000 property this surcharge alone can run to five figures.

Mortgage and finance. Limited company buy-to-let mortgages usually carry slightly higher rates and arrangement fees than personal BTL deals, and lenders almost always require personal guarantees from the directors. Refinancing an existing loan into the company means new legal and valuation fees.

Running costs. A company must file annual accounts and a corporation tax return, maintain statutory records at Companies House, and usually needs an accountant — budget £800–£1,500+ per year. For these reasons, the company route most often makes sense for new purchases, for landlords building a larger portfolio, and for higher- and additional-rate taxpayers with substantial mortgage interest. For a single, low-mortgage property owned by a basic-rate taxpayer, staying personal is frequently cheaper once all costs are counted.