The short answer: from 6 April 2027, rental profits held personally are taxed at 24%, 44% or 49%, while a company pays Corporation Tax at 19% to 25% and deducts mortgage interest in full. For higher rate landlords with mortgages who reinvest their profits, a company is often more tax efficient. Moving properties you already own can trigger Capital Gains Tax and Stamp Duty Land Tax, so the decision needs proper modelling, and schemes that promise to avoid those costs should be treated with great caution.
What the Budget Changed for Landlords
The 2025 Budget had already announced separate rates for property income from April 2027. The Autumn Budget on 28 October 2026 doubled that increase.
| Taxpayer band | 2026/27 | From 6 April 2027 |
|---|---|---|
| Basic rate | 20% | 24% |
| Higher rate | 40% | 44% |
| Additional rate | 45% | 49% |
| Tax credit on mortgage interest | 20% | 24% |
The tax credit on mortgage interest rises with the basic property rate, but higher rate landlords still receive relief at only 24% on interest that costs them 44% in tax terms. From April 2027 the Personal Allowance is also set against employment, pension and trading income first, so more rental profit falls into the higher bands.
None of this applies to property held through a limited company. A company pays Corporation Tax at 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between, and deducts its finance costs in full.
Worked Example: Personal Ownership vs a Company
A higher rate taxpayer receives £40,000 of rental profit before mortgage interest and pays £15,000 of interest. Their other income already uses their Personal Allowance and basic rate band.
| Personal, 2026/27 | Personal, from April 2027 | Company, from April 2027 | |
|---|---|---|---|
| Profit before interest | £40,000 | £40,000 | £40,000 |
| Interest deducted | None | None | £15,000 |
| Taxable profit | £40,000 | £40,000 | £25,000 |
| Tax at 40%, 44% or 19% | £16,000 | £17,600 | £4,750 |
| Less mortgage interest credit | £3,000 | £3,600 | Not applicable |
| Tax payable | £13,000 | £14,000 | £4,750 |
| Left after interest and tax | £12,000 | £11,000 | £20,250 |
From April 2027 this landlord pays £1,000 more each year if nothing changes. In a company, £20,250 remains available to repay debt or buy further property. If all of it were paid out as dividends, tax at 35.75% would leave about £13,011 before the £500 Dividend Allowance, still more than personal ownership.
The example is simplified. It assumes the company qualifies for the 19% rate, and it ignores company running costs, the cost of moving the properties and how each owner's wider income is taxed. Real figures depend on your own circumstances.
The Cost of Moving Properties You Already Own
Transferring a property to a company you control is treated as a sale at market value, even if no money changes hands. That can bring several costs at once.
- Capital Gains Tax: gains are taxed at 18% or 24%. Incorporation relief can defer the gain where a whole business is transferred for shares, but HMRC accepts it only where the letting amounts to a genuine business rather than passive investment. The leading case, Ramsay v HMRC, involved around 20 hours a week of management. From 6 April 2026 the relief must also be claimed rather than applying automatically.
- Stamp Duty Land Tax: the company pays SDLT on the market value, including the 5% surcharge on additional residential property. Multiple dwellings relief was abolished from 1 June 2024. Relief may be available where the properties are genuinely held through a partnership, but the rules are complex and HMRC scrutinises them closely.
- Mortgages: existing buy to let loans usually cannot be transferred, so the company needs new borrowing. Early repayment charges, arrangement fees and higher company lending rates all count.
- Ongoing costs: a company needs annual accounts, a Corporation Tax return and a confirmation statement. A residential property worth over £500,000 may also need an annual ATED return, even where relief is available.
For some landlords these costs are recovered within a few years. For others they never are. The only way to know is to model your own portfolio.
Buying New Property Through a Company
For future purchases the picture is simpler. A property bought by a company from the start carries no transfer CGT, and the SDLT is broadly what an individual landlord buying a second property would pay anyway.
Many landlords now keep their existing properties personally and buy all new ones through a special purpose vehicle (SPV): a limited company that only holds property. Lenders recognise this structure and most buy to let lenders offer SPV mortgages, usually with personal guarantees from the directors.
A company can also help with longer term family planning. Shares can be structured so that future growth in value passes to the next generation while the current owners keep control and income. This needs careful drafting and should sit alongside your wills and wider Inheritance Tax plans.
Be Wary of Schemes That Promise Tax Free Incorporation
Higher rates on rental income will bring a fresh wave of marketing for arrangements that claim to move a portfolio into a company with no Capital Gains Tax or SDLT. Some route properties through a partnership and an LLP before liquidating the LLP into a company.
HMRC has named this arrangement in Spotlight 69. It says the scheme does not work and that it will pursue the tax, interest and penalties. For LLP liquidations from 30 October 2024, legislation now taxes the gain the scheme was designed to avoid.
Genuine incorporation can be worthwhile, but a structure that only works if HMRC never looks at it is not planning. Ask any adviser how the arrangement has been reported to HMRC, what happens if it is challenged and who pays the bill if it fails.
Who a Company Suits, and Who It Does Not
| A company is more likely to suit | Personal ownership is more likely to suit |
|---|---|
| Higher or additional rate taxpayers | Basic rate taxpayers with modest rental profit |
| Mortgaged portfolios with significant interest | Properties owned outright or with low borrowing |
| Landlords reinvesting profits to grow | Landlords who need all the rental income to live on |
| Plans to buy further property | No plans to expand |
| Long term holding and family succession | Plans to sell in the next few years |
Most landlords sit somewhere between the two columns. Splitting ownership between spouses, keeping existing properties personal while buying new ones in a company, or a phased approach can each be the right answer.
How We Can Help
Our Property Ownership Review models your own portfolio under personal, company and mixed ownership from April 2027. It sets out the tax each year, the one off cost of any change and how long it would take to recover, so you can decide with real numbers rather than headlines. Based in Andover, we work with landlords across Hampshire and the UK. Read our property investment tax guide, see our tax planning page or get in touch to arrange your review.