The Rise of Limited Company Buy-to-Let Investments in 2025

Why Are Landlords Moving to Limited Companies?

1. Mortgage Interest Tax Relief Changes

Since April 2020, individual landlords can no longer deduct 100% of mortgage interest as an expense.

Instead, they get a 20% tax credit, which reduces profit margins, especially for higher-rate taxpayers.

Limited companies can still fully deduct mortgage interest, making them far more tax-efficient.

2. Lower Corporation Tax vs. Income Tax

Limited companies pay Corporation Tax (25%) instead of higher personal income tax rates (40-45%).

Retaining profits within a company is more cost-effective than withdrawing rental income personally.

3. Increased Inheritance Tax (IHT) Planning Benefits

Properties held within a Limited Company can be passed on via shares, reducing IHT liabilities.

📌 Source: HM Revenue & Customs – UK Property Taxation Guide 2025

How Limited Company Buy-to-Let Works

Step 1: Setting Up a Buy-to-Let Limited Company (SPV)

• Register a Special Purpose Vehicle (SPV) with Companies House.
• Use a standard SIC Code (68100, 68209, or 68320) for property rental.
• Open a business bank account for transactions.

Step 2: Financing Your Investment

• Use Limited Company Buy-to-Let Mortgages (often with higher rates but greater tax efficiency).
• Deposit personal funds as a director’s loan to withdraw later tax-free.

Step 3: Managing Rental Income & Taxes

• Pay Corporation Tax (25%) on profits instead of personal Income Tax.
• Extract profits via dividends (with lower tax rates for basic-rate taxpayers).

📌 Source: UK Finance – "Understanding Limited Company Buy-to-Let Mortgages"

Comparing Individual vs. Limited Company Buy-to-Let Taxation

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Example: A landlord earning £40,000 in rental profit under personal ownership could pay up to £18,000 in taxes, whereas in a Limited Company, tax liabilities could drop to £10,000 or less.

📌 Source: The Guardian – "Limited Company Buy-to-Let: A Tax-Efficient Option?"

Pros & Cons of Buying Property Through a Limited Company

✅ Pros (Advantages of Limited Company Buy-to-Let) ✔ Higher tax efficiency (mortgage interest is fully deductible). ✔ Lower tax on profits (Corporation Tax at 25% vs. higher Income Tax rates). ✔ Better for long-term wealth building (easier IHT planning). ✔ Tax-efficient dividend withdrawals for basic-rate taxpayers.

❌ Cons (Challenges of Limited Company Buy-to-Let) ✖ Higher mortgage rates (Limited Company BTL mortgages cost 0.5%-1% more). ✖ Incorporation costs (legal fees, accountant setup). ✖ Tougher lending criteria (fewer lenders offer Limited Company mortgages).

📌 Source: Rightmove Property Insights 2025

How to Decide if a Limited Company Structure Is Right for You

✅ Best for Landlords Who:

• Plan to own multiple properties or grow their portfolio.
• Want to minimize tax on rental income.
• Need a long-term inheritance tax strategy.

❌ Not Ideal for:

• Small-scale landlords with just one property.
• Investors who want easy access to rental profits.

Tip: Compare mortgage costs and interest rates to optimize financing. Analyze long-term investment profitability for different ownership structures.

📌 Source: Nationwide Building Society – Buy-to-Let Landlord Guide 2025

Final Thoughts: Should You Incorporate Your Buy-to-Let Business? 🔹 If you own multiple properties or plan to expand, a Limited Company structure can significantly reduce tax liability. 🔹 Higher mortgage rates may offset savings, so it’s crucial to analyze profitability before deciding. 🔹 InvestorLet makes it easy to compare property investment strategies, ensuring you make the most tax-efficient decisions.

💡 Thinking about incorporating? Use InvestorLet to analyze rental income projections before making the switch.

📲 Start optimizing your buy-to-let portfolio—Download InvestorLet today! 🚀