BTL Limited Company Tax Efficiency: Is Incorporation Worth It in 2026/27?

A record 66,587 new buy-to-let companies were set up in 2025, according to Hamptons, and more than three-quarters of new buy-to-let purchases now go through one rather than a personal name.

The direction of travel is not new. What has changed since the last time most guides ran these numbers is the detail: dividend tax went up in April 2026, the April 2027 property income rate rise is now law rather than a proposal, and the 66,587 figure itself is fresh data most articles have not caught up with.

None of that changes the honest answer to "should I incorporate?" It is still: it depends. Here is how to work out where you sit.

The Personal Ownership Squeeze

Section 24 is the starting point for almost every incorporation conversation, and it has not gone away.

Individual landlords cannot deduct mortgage interest from rental income before calculating tax. Instead, they get a basic rate tax credit, currently 20%, on their finance costs. For a basic rate taxpayer, this roughly nets out. For anyone paying tax at 40% or 45%, it does not.

Take a landlord with £15,000 of gross rental income, £8,000 of mortgage interest, and £2,000 of other allowable expenses, taxed at the higher rate:

Taxable profit under Section 24: £15,000 minus £2,000 = £13,000
Tax at 40%: £5,200
Less 20% credit on £8,000 finance costs: £1,600
Net tax: £3,600

Real cash profit after mortgage interest and expenses is £5,000. A £3,600 tax bill on £5,000 of actual profit is an effective rate of 72%.

Run the same numbers through a limited company. The company deducts the full £8,000 mortgage interest as a normal business expense before tax, leaving £5,000 taxable profit. At the small profits rate of 19%, that is a corporation tax bill of £950. The gap, before any dividend is even drawn, is £2,650 a year on this one property.

Frequently Asked Questions

Is a limited company still more tax-efficient for buy-to-let in 2026/27?

For higher and additional rate taxpayers, usually yes, and the gap widens further from April 2027 when personal property income rates rise to 42% and 47%. But dividend tax also rose in April 2026, to 10.75% and 35.75%, which eats into the advantage if you draw profits out as income rather than reinvesting them. The right answer depends on your tax band, whether you plan to retain profit in the company, and whether you are incorporating an existing portfolio or buying fresh.

What is the current corporation tax rate for a buy-to-let company?

19% on profits up to £50,000, 25% on profits above £250,000, with marginal relief tapering the rate in between. These thresholds are shared across any associated companies you control. Most single-property or small-portfolio SPVs sit comfortably in the 19% band.

How much does it cost to move an existing buy-to-let into a limited company?

Two tax charges land at once: SDLT on the transfer at market value, including the 5% company surcharge, and CGT on any gain built up since you bought the property, at 18% or 24%. On a property with meaningful embedded gains, combined costs can run to tens of thousands of pounds before legal and accounting fees, often taking a decade or more to recover through the ongoing tax saving.

How many buy-to-let companies were set up in 2025?

A record 66,587, according to Hamptons' analysis of Companies House data, up 8% on 2024's 61,517. More than three-quarters of new buy-to-let purchases are now made through a limited company rather than in personal names.