Buying Property as a Limited Company in Prime Central London – Advantages and Disadvantages

London remains an important property investment market benefitting from historically consistent capital growth and global appeal. Unsurprisingly, central London areas such as Westminster, Pimlico and Mayfair, are a magnet for those buying and selling property through a limited company. 

There has been a substantial shift towards purchasing property this way, primarily since a shake-up of mortgage tax relief rules. It was the former Chancellor, George Osborne, who made the changes back in 2015. Revised mortgage interest tax rates were introduced on a sliding scale and by April 2020, private landlords operating as sole traders couldn’t deduct any mortgage expenses from their rental income to reduce their tax bill. The reform resulted in landlords seeing a considerable reduction in their post-tax profits. In fact, figures published by the Guild of Residential Landlords suggested London landlords saw profits decrease by 20%. 

Advantages of buying property through a limited company 

Some landlords left buy-to-let after the tax rates changed but many found ways around the stricter legislation when making property purchases and holding portfolios. In past years, an investor would buy property as an individual, with the property held in their name and the rental income declared on a self assessment tax return. 

Once mortgage interest couldn’t be deducted from a self assessment calculation, many landlords started buying property through a limited company, which is a separate legal entity. Instead of paying income tax, a landlord would pay corporation tax on any rental income. 

If you’re active in property investment, you may question whether setting up a limited company when buying a property on holding buy-to-lets will bring tax efficiencies. Generally, this structure works best for landlords who pay higher rates of personal tax. 

How to set up a limited company to buy property  

You’ll need to decide whether your limited company will be limited by shares or limited by guarantee. For landlords purchasing property, a limited by shares structure is most common. You must appoint a company director, usually the lead property investor, and choose at least one shareholder. Handily, a shareholder can also be a director. A limited company also needs a guarantor or the identification of people with significant control (PSC).  

Of course, your limited company will need a name and a document setting out how you will run the company. You’ll also need to familiarise yourself with what records you’ll need to keep. Once all this is in place, you can register with Companies House, using an official address, and choose a SIC code – this identifies what your company does. 

It’s worth looking carefully at the pros and cons of buying property through a limited company before deciding if a limited structure is beneficial. We have produced this guide to help you determine whether you should buy property as an individual or start buying a property through a limited company: 

What Are The Pros And Cons Of Buying Property Through A Limited Company? 

Advantages Of Property Investment Through A Limited Company 

Tax Treatment Of Profits 

Buy-to-let profits are taxed via income tax alongside other earnings. That means adding the money made from rental income to the amount you receive from a salary and any additional money from shares or dividends. The standard personal tax-free allowance is £12,570 (although this is reduced if your income exceeds £100,000). Income above this tax-free allowance is taxed at the rates listed below: 

Tax Band                          Income                              Tax rate  

Personal Allowance       Up to £12,570                 0%  

Basic rate                         £12,571 to £50,270        20%  

Higher rate                      £50,271 to £125,140     40%  

Additional rate               £125,140+                       45%  

If you are buying a property through a limited company, you will be liable for corporation tax on your rental profits. The rate for the corporation tax year starting 1^st April 2025 is 19% for small profits rate (companies with profits under £50,000) and 25% for main rate (companies with profits over £250,000). So, if you are a higher-rate taxpayer, you stand to make tax savings – 19% or 25% versus 40% or 45%. 

Want to learn more about lettings? Find out how to calculate the rental yield of a London property and read about the new Renters Rights Bill explained for landlords.

You will still be taxed if you want to access your earnings, either via income tax on the salary you pay yourself or tax on dividend payments. More on this later when we look at the tax you’ll pay when you take your money from your company. However, there are ways a tax accountant can minimise the tax you pay. 

Tax Treatment Of Mortgage Interest 

Private landlords can no longer deduct mortgage interest to reduce what they pay to HMRC. Instead, they receive a flat tax credit of 20% of their mortgage interest payments. If you are an additional or higher rate taxpayer, you won’t get all the tax back on your mortgage payments as the credit only refunds tax at the basic rate, not the top rate you pay. Furthermore, you may also find yourself pushed into the next tax bracket because you must declare the income used to pay the mortgage on your tax return. 

This is a common problem for many property investors and is why it sometimes makes more sense to become a limited company rather than pay tax in a higher band. 

Limited company status becomes much more attractive because, unlike property owned by an individual investor, mortgage interest is treated as a business expense for limited companies. This means it’s possible to deduct the cost of mortgage interest before paying your corporation tax. 

Inheritance Tax Benefits 

Landlords planning to pass their property portfolio down to children or family members could avoid large amounts of inheritance tax by buying a property through a limited company. That’s because they can apply Business Property Relief (BPR) to their income and assets.  

Since 2013, property investors have been allowed to hold shares that qualify for BPR in a tax-efficient ISA account, provided they meet the necessary criteria. Public companies can’t access this BPR because their shares are listed on the stock exchange. It’s also worth noting that BPR is subject to reform, with changes that may impact landlords due in April 2026. 

At the same time, sole traders (i.e. self-employed property investors) are forbidden from accessing BPR if they plan on transferring fixed assets, such as premises, land and machinery. In other words, this is a form of tax relief specifically aimed at limited companies.  

Limited Liability For Landlords  

One of the benefits of buying property through a limited company is limiting liability. In simple terms, this means should the company get into trouble, such as running up debts or being sued, the company is held liable and not the individual.  

A limited company is a separate legal entity and it owns any properties as a business, not as a personal interest. As such, the personal assets owned by the limited company’s directors (such as a family home) are protected from company debts or lawsuits.  

More Property Ownership Options  

If a sole trader landlord purchases a buy-to-let, a maximum number of four people can share ownership of the dwelling. It is much more flexible when buying property through a limited company. Instead of individuals being owners, everyone who holds shares in the company is a part owner and there is no cap on how many shareholders a limited company in the UK can have. 

Disadvantages Of Buying Property Through A Limited Company 

Mortgage Availability 

The number of buy-to-let mortgage products offered to limited companies can be lower than for individuals. Because of this, you may find it much more challenging to arrange a mortgage. On top of that, the mortgage rates will probably be higher. 

Tax When You Take Money Out 

To access your buy-to-let earnings, you can pay yourself a salary, which will be liable to income tax but will count as a cost when calculating your pre-tax profit for corporation tax purposes. 

Rental profits taken as dividends are not considered a business expense. For tax year 2025-2026, the dividend tax-free allowance is £500. How much tax you pay on dividends above this amount depends on your tax band. The following dividend rates apply. 

Tax band          Tax rate on dividends over the allowance 

Basic rate          8.75% 

Higher rate       33.75% 

Additional rate 39.35% 

This is fine if you plan to leave the rental profits in the company. However, if you need to live off your rental income (which many small-scale landlords do), you must do the maths to determine whether a limited company is financially favourable and will reduce your HMRC bill. Speak to a tax accountant, as there are ways to maximise your tax efficiency, such as splitting dividends with a spouse who is a basic rate taxpayer. 

Transferring Any Properties You Own In Your Own Name Is Costly 

Landlords who already own buy-to-lets but want to switch to a limited company must go through a prescribed legal process. This involves paying taxes and conveyancer fees. Effectively, you have to ‘sell’ your buy-to-let properties to yourself. Naturally, there are costs involved in this, such as: 

Capital Gains Tax (CGT): CGT applies when an individually owned buy-to-let is sold. The amount of CGT paid depends partly upon how much income tax is paid annually by the property owner. Currently, 18% CGT applies to basic taxpayers, and the higher tax rate is calculated at 24%. In 2025-2026, individuals enjoy a tax-free CGT allowance of £3,000, which reduces their CGT liability.  

Limited companies do not receive this CGT allowance. Instead, they pay corporation tax on profit made when selling a buy-to-let. Depending on the owner’s tax status and profit margin, it can be cheaper to hold and sell buy-to-lets as an individual. 

Stamp Duty Land Tax: Stamp duty land tax SDLT, is a standard charge based on your property’s worth. Because an investment property isn’t your primary residence (known as an additional purchase), a property investor will also pay a further 5% surcharge on top of the standard SDLT. A landlord will also pay SDLT when they sell a privately owned buy-to-let to their limited company. If you are a corporate body purchasing dwellings worth more than £500k, it is highly likely you’ll be charged a flat SDLT rate of 17%, so take professional tax advice. You can find more information on stamp duty costs here. 

Conveyancing and solicitor fees: Just as if you were selling to another individual, the standard procedure will apply, i.e. a solicitor or conveyancer will be required to ensure the switch is legal. 

Early redemption charges and increased mortgage costs: Some lenders will charge a repayment fee if you have only just started paying your mortgage off. This is typically between 1% and 5%. 

For some landlords, these costs make moving to a limited company prohibitive. For others, the long-term tax savings far outweigh these costs. 

Want to know more about lettings? You can also read our residential block management guide and learn how to check a tenant’s right to rent in central London.

Increased Administration And Hassle 

You’ll need to decide whether buying property through a limited company creates too much paperwork. As a director, you’ll be expected to file annual accounts and a confirmation statement, prepare a tax return so HMRC can calculate your corporate tax bill, potentially prepare a separate self assessment tax return to declare any untaxed income, such as dividends or expenses, set up and run PAYE if you pay yourself a director’s salary and issue tax-efficient dividends. You can employ an accountant to do this for you but it will be another cost to eat into your profits. 

Want to learn more about lettings? You can also read our residential block management guide and learn how to check a tenant’s right to rent in central London.

Frequently Asked Questions About Buying Property Through A Limited Company 

Find Out More 

If you own investment property or plan to buy one in Belgravia, Knightsbridge, Chelsea, South Kensington or Victoria , either as an individual or through a limited company, Best Gapp can help. Contact us today to find out more.