Pre-Commitment Decision
Ltd Company vs Personal Name: How to Decide
Investor about to buy and choosing the holding structure.
Key facts
- A limited company pays Corporation Tax on rental profit, currently lower than higher-rate Income Tax, and retains full mortgage interest deductibility.
- An individual higher-rate taxpayer in personal name has mortgage interest relief restricted to a 20% tax credit under Section 24.
- Extracting money from a company via dividends creates a second tax layer; the combined rate can exceed personal-name tax for small portfolios.
- Transferring existing personally owned properties into a company is usually a sale, triggering SDLT and CGT unless genuine incorporation relief applies.
- There is no default correct answer; the right structure depends on marginal rate, portfolio scale, reinvestment intent and exit plan.
Choosing the wrong wrapper is a five-figure mistake compounded over the hold. The correct answer depends on marginal tax rate, portfolio size, exit horizon and whether you actually want to retain profits.
When does a limited company win?
A limited company usually wins for higher-rate taxpayers holding four or more properties who intend to retain and reinvest profits for at least 7–10 years. The combination of full interest deductibility and Corporation Tax beats the Section 24 credit over that horizon.
A limited company usually wins for higher-rate taxpayers holding four or more properties who intend to retain and reinvest profits for at least 7–10 years.
- Full mortgage interest deductibility
- Corporation tax on retained profit (not marginal income tax)
- Cleaner intergenerational transfer via shares
When does personal name still win?
Basic-rate taxpayers, a single or dual property, or investors who plan to consume the rent all favour personal ownership. The double-tax layer on drawing dividends often erases the corporate benefit.
Basic-rate taxpayers, a single or dual property, or investors who plan to consume the rent all favour personal ownership. The double-tax layer on drawing dividends often erases the corporate benefit.
What is the cost of getting it wrong?
Changing structure later is usually a sale to the company, which triggers SDLT and CGT. Incorporation relief may apply only where there is a genuine property business with sufficient activity. The cost of fixing the wrong wrapper often exceeds the tax saved by choosing the right one at the start.
Transferring existing personal properties into a limited company is typically a sale, which triggers SDLT and CGT. Incorporation relief may apply for a genuine property business — take specialist tax advice first.
Limited company vs personal name — side by side
| Factor | Personal name | Limited company |
|---|---|---|
| Mortgage interest | 20% tax credit only (Section 24) | Fully deductible against rental profit |
| Tax on profit | Income Tax at your marginal rate | Corporation Tax |
| Accessing income | No extra tax on rent received | Dividend tax on extraction |
| Inheritance planning | Less flexible | Shares easier to transfer |
| Switching later | Expensive — treated as a sale | Expensive to unwind |
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