For UK landlords building a property portfolio, the structural decision is whether to hold properties personally or in a limited company. Personal ownership is simpler but for higher-rate taxpayers with mortgaged property, the mortgage interest restriction makes the company route increasingly tax-efficient. The break-even point typically arises around 3-4 mortgaged properties for a higher-rate taxpayer.

This is one of the most asked questions in UK landlord tax. The right answer depends on: your personal tax band, mortgage leverage, growth plans, and exit strategy. Get specific advice; this guide outlines the framework.

The tax difference at a glance

Personal ownership

Rental profit taxed as Income Tax at your marginal rate (20% / 40% / 45%).
Mortgage interest gets a 20% basic-rate tax credit (not a deduction).
Annual exempt amount for CGT (£3,000) available on gains.
Personal Allowance (£12,570) and basic-rate band shared with other income.
Private Residence Relief available if it''s your main home.

Limited company ownership

Rental profit taxed as Corporation Tax (19-25%).
Mortgage interest fully deductible against profit.
No Annual Exempt Amount on company gains.
No Personal Residence Relief.
Profits extracted as dividends taxed at 8.75% / 33.75% / 39.35% (after £500 dividend allowance) — IF extracted; can be retained in the company.
Companies pay business-rate SDLT (15% above £500,000 in some cases).

The mortgage interest restriction — the central driver

Since 2017, individual landlords cannot fully deduct mortgage interest from rental income. Effect for higher-rate taxpayers: rental income is taxed at the marginal rate (40%) on the gross profit BEFORE interest, with only a 20% credit on the interest.

For a higher-rate taxpayer with significant mortgaged property, this hurts.

Worked example — single property, £30,000 gross rental income, £15,000 mortgage interest, £5,000 other costs:

Old rules (pre-2017):

Profit = £30,000 - £15,000 - £5,000 = £10,000.
Tax at 40% = £4,000.

Current rules (individual landlord):

Profit = £30,000 - £5,000 = £25,000.
Tax at 40% = £10,000.
Minus 20% credit on £15,000 interest = £3,000.
Net tax = £7,000.

That''s £3,000 more tax per year per property — for a higher-rate taxpayer.

Limited company alternative:

Profit = £30,000 - £15,000 - £5,000 = £10,000.
Corporation Tax at 19% (small profits rate) = £1,900.
If retained in the company: no further tax.
If extracted as dividend: another £870 (after dividend allowance) at 33.75% = roughly £8,400 of personal tax.

Total tax in company route, if extracted entirely: £10,300 — worse than personal ownership in this example.

BUT — if the profit is retained for further property purchases or simply held, the company tax cost is just £1,900. £8,400 less tax per year vs personal ownership.

For landlords building a portfolio (where rental profits fund further deposits), the company structure is dramatically more efficient.

The break-even point

Rough heuristic — when does the company route become more efficient than personal ownership for an individual UK landlord?

Landlord''s tax band	Number of mortgaged properties before company is more efficient
Basic rate (20%)	Almost never — personal stays cheaper
Higher rate (40%) — extracting all profit	Roughly 4-6 properties
Higher rate (40%) — retaining most profit	2-3 properties
Additional rate (45%) — extracting all profit	Roughly 3-5 properties
Additional rate (45%) — retaining most profit	1-2 properties

The "retaining profit" column is where the company route really wins — if you don''t need the cash and can leave it inside the company for reinvestment, you''re only paying Corporation Tax.

The friction of moving from personal to company

Many landlords would benefit from the company structure but can''t justify the cost of moving. Incorporating an existing personal portfolio involves:

SDLT on transfer

You''re selling the property to your company. The company pays full standard SDLT + the 5% additional property surcharge on each property — even though no real cash is changing hands.

For a portfolio of 4 properties at £250K each, this is approximately £60,000-£80,000 of SDLT just on the transfer.

CGT on transfer

You''re disposing of each property to the company at market value, regardless of cash actually changing hands. CGT applies on the gain.

For a £250K property bought at £200K, the CGT bill on transfer is around £15-£25K per property.

Lender requirements

Most BTL mortgages don''t allow transfer to a different legal entity. You typically need to refinance — paying off the personal mortgages and taking new mortgages in the company''s name. Some lenders charge early repayment fees; company mortgage rates may be 0.5-1.5 percentage points higher than personal rates.

Total cost of incorporation

For a typical 4-property portfolio: £80-£150K in SDLT, CGT, and refinancing costs. The annual tax saving needs to recover this within 5-10 years to be worth doing.

When incorporation works

Practical situations where incorporation pays back:

Large portfolio (5+ properties).
Significant residual mortgage debt (so the interest restriction hurts).
Long expected holding period.
Plans to grow the portfolio (compounding benefits of retained earnings).

Incorporation Relief — the partial fix

Section 162 Incorporation Relief can defer the CGT on transferring a business (including a property "business") to a company, IF:

The whole rental business is transferred.
Consideration is mostly in company shares.
The business is actually a business (multiple properties, active management — HMRC scrutiny applies).

Incorporation Relief works for some portfolios but not all — get specific tax advice. The SDLT cost still applies separately.

When personal is better than company

Despite the mortgage interest restriction, personal ownership still wins for:

Basic-rate taxpayers — no benefit from the company route.
Single property landlords — the company friction isn''t worth it.
Landlords approaching retirement — Private Residence Relief and Annual Exempt Amount matter.
Landlords planning to sell in the near term — extra friction is worse than the tax saving.

When company is better than personal

Higher-rate or additional-rate taxpayers with multiple mortgaged properties.
Landlords actively growing the portfolio — reinvesting profits compounds tax-efficiently.
Landlords with significant non-rental income — keeps rental in a separate tax bucket.
Landlords wanting to bring family in — share structures allow income distribution to family members.

Practical setup options for company route

New properties only

For new acquisitions, set up a limited company specifically for property — sometimes called a "Special Purpose Vehicle" (SPV) — and acquire directly into it. No transfer friction.

Gradual migration

Some landlords keep existing properties personally and acquire all new ones through a company. After a few years, the portfolio is mixed. Eventually, when timing makes sense (downsizing, retirement, sale), the personal properties are sold and the proceeds reinvested in the company.

Full incorporation

For larger portfolios where the maths supports the cost, full incorporation in a single transaction.

What to do this month

Calculate your effective tax on rental profit under current personal ownership.
Model the same portfolio under a company structure (your accountant can do this in 1-2 hours).
If you''re higher-rate and planning to grow, plan future acquisitions through a new SPV.
If you''re considering full incorporation, get specific advice on Incorporation Relief eligibility — the SDLT and CGT costs are real and need to be modelled before committing.

Property portfolio structure: personal vs limited company