Introduction
Many UK landlords are reconsidering how their rental properties are owned as tax rules, interest costs, and future planning pressures continue to evolve. We set out when holding property in a limited company may make sense in 2026, and when it can introduce unnecessary cost, complexity, or risk.
Should landlords consider transferring property into a limited company in 2026?
We are seeing more landlords question whether incorporation could improve their overall tax position. In 2026, the decision depends on income levels, borrowing, long-term plans, and whether landlords are prepared for the upfront tax costs and ongoing administration that a company structure brings. There is no single answer that suits everyone. What has changed is the cumulative effect of tax rules, higher interest rates, and longer-term planning considerations. These make incorporation very effective for some landlords, but counterproductive for others.
How do tax, mortgage interest and profit extraction rules influence this decision?
Tax treatment is usually the starting point. The way rental profits are taxed, how mortgage interest is treated, and how money is taken out of a company all interact. Focusing on one element in isolation often leads to poor decisions.
How does income tax differ between personal ownership and companies?
When property is owned personally, rental profits are added to other income and taxed at marginal income tax rates. For higher- and additional-rate taxpayers, this can mean 40% or 45% tax on profits.
A limited company pays corporation tax on its profits. As of January 2026, this operates on a tiered basis: profits up to £50,000 are taxed at the small profits rate of 19%, profits over £250,000 at the main rate of 25%, with marginal relief applying in between. These thresholds are reduced where there are associated companies. Corporation tax is therefore often lower than higher personal tax rates, but it is only the first layer of tax.
Why does mortgage interest relief matter more for higher-rate landlords?
Mortgage interest relief remains one of the most important drivers behind incorporation. Individual landlords cannot deduct mortgage interest in full when calculating taxable profits. Instead, they receive a basic-rate tax reduction of 20%, regardless of whether they pay tax at higher rates.
Companies can generally deduct mortgage interest as a business expense before tax. For landlords with high borrowing, this difference can significantly alter the tax outcome. HMRC’s guidance on how mortgage interest relief works for individual landlords explains the mechanics in detail. That said, interest relief alone rarely justifies restructuring.
How are profits taxed when taken out of a property company?
Company profits are not automatically personal income. Landlords can leave profits in the company, pay themselves a salary, or extract funds as dividends. Each option has different tax consequences. In practice, landlords who need to draw most of the profits for living costs often find that the combined effect of corporation tax and personal tax narrows the apparent advantage of incorporation.
When does incorporation provide long-term tax or structuring advantages for landlords?
Incorporation tends to work best when landlords look beyond annual tax bills and focus on longer-term objectives.
Does incorporation help landlords reinvest and grow portfolios?
A company structure allows profits to be retained after corporation tax rather than being taxed immediately at personal rates. For landlords who are reinvesting rather than drawing income, this can support portfolio growth and improve cashflow over time.
How does incorporation affect inheritance and succession planning?
Shares in a company can be easier to transfer or reorganise than individual properties. This can provide flexibility for succession planning, gradual changes in ownership, or bringing family members into the business, even though inheritance tax considerations still apply.
Are there advantages for landlords operating at scale?
Larger portfolios are often better suited to a corporate framework. Reporting, finance, and management structures tend to align more naturally with company ownership, making incorporation about resilience and structure rather than short-term tax savings.
What taxes apply when transferring property into a limited company?
Upfront tax costs are often the biggest barrier to incorporation and should never be underestimated.
When does Capital Gains Tax arise on incorporation?
Transferring property into a company is normally treated as a disposal at market value, particularly where the company is connected to the landlord. This can trigger Capital Gains Tax on any increase in value since purchase. In some cases, incorporation relief may defer the gain, but only where the property letting activity qualifies as a genuine business. This is highly fact-specific and should not be assumed.
How does Stamp Duty Land Tax affect incorporation costs?
Stamp Duty Land Tax is frequently the most expensive element of incorporation. Companies acquiring residential property usually pay the higher rates of SDLT, which include a 5% surcharge. In some corporate situations, special SDLT rules can apply, including higher threshold rates.
Current SDLT rules and rates are set out on GOV.UK and should always be checked before modelling incorporation costs. Where a company takes on existing mortgage debt, that debt can form part of the SDLT consideration, even if no cash changes hands.
Can incorporation relief apply to landlords?
Incorporation relief may defer Capital Gains Tax where strict conditions are met, but it does not remove SDLT. Evidence of active business activity, record-keeping, and professional advice are critical where relief is being considered.
Personal ownership vs limited company: a practical comparison
| Area | Personal ownership | Limited company |
| Tax on profits | Income tax at marginal rates | Corporation tax, then tax on extraction |
| Mortgage interest | Restricted relief | Generally deductible |
| Profit access | Immediate personal income | More efficient if retained |
| Transfer taxes | None initially | CGT and SDLT on incorporation |
| Ongoing admin | Lower | Higher compliance requirements |
What ongoing compliance and administrative changes should landlords expect?
Tax savings alone do not make a company worthwhile if the administrative burden is underestimated.
What additional filings does a property company require?
A company must prepare statutory accounts, file corporation tax returns, submit confirmation statements, and maintain company records. Payroll or dividend reporting may also apply, depending on how profits are extracted.
How do accounting costs change after incorporation?
Company compliance is more involved than personal tax returns, and costs are typically higher as a result. We support landlords through this process via our corporate tax services, ensuring compliance and planning are considered together. These additional costs should be factored into any long-term projections.
What factors should landlords evaluate before making any ownership changes?
We always encourage landlords to step back and consider the wider picture.
How long do landlords plan to hold the properties?
Incorporation is generally a long-term decision. If properties are likely to be sold in the near future, upfront taxes can outweigh any ongoing benefits.
Will lenders allow existing mortgages to be transferred?
Most incorporations require refinancing. This can involve new rates, fees, and lending criteria, all of which affect affordability and risk.
How does future income planning affect the decision?
Retirement plans, pension contributions, and future income needs all influence whether incorporation makes sense. We often explore these issues as part of broader personal tax planning discussions with clients.
How should landlords approach incorporation decisions strategically in 2026?
In 2026, incorporation works best when it forms part of a wider strategy. We recommend modelling different scenarios, considering financing changes, and aligning ownership structure with long-term goals rather than reacting to one tax rule alone.
Conclusion
Transferring a property portfolio into a limited company can offer real advantages for some landlords in 2026, particularly where borrowing is high and profits are being reinvested. For others, the upfront tax cost and added complexity outweigh the benefits. As accountants who work closely with UK landlords, we believe incorporation should always be assessed in the context of your wider tax position and long-term plans. If you are considering a change in ownership, we invite you to speak with us so we can review your position and help you decide whether incorporation genuinely supports your objectives.
Frequently asked questions
Does incorporation automatically reduce tax for landlords?
No. While corporation tax rates can be lower, total tax depends on profit extraction, borrowing, and long-term plans.
Can landlords move properties into a company without paying SDLT?
In most cases, SDLT applies, even where no money changes hands, particularly if mortgage debt is transferred.
Is incorporation relief available to all landlords?
No. It only applies where the letting activity qualifies as a business, which is assessed on the facts.
Do lenders treat property companies differently?
Yes. Company buy-to-let mortgages often have different rates, terms, and availability compared to personal borrowing.
Should landlords incorporate all properties at once?
Not always. Some landlords phase changes or retain mixed ownership structures depending on their objectives.