How does mortgage interest tax relief work for limited company buy-to-let?
A limited company can deduct mortgage interest in full as a business expense against its rental profit before corporation tax, whereas individual landlords can only claim a 20% basic-rate tax credit under Section 24. That difference is the single biggest reason so many landlords now buy through an SPV limited company. Assesr packages both personal-name and SPV buy-to-let finance into a lender-ready credit paper in around 60 seconds and matches you to specialist BTL lenders that lend to limited companies.
What is Section 24 and why did it change everything?
Historically, individual landlords deducted mortgage interest from their rental income before calculating taxable profit. Section 24 changed that. Now, individual landlords add all rental income to their taxable income and receive only a 20% basic-rate tax credit on their finance costs. For a higher-rate (40%) or additional-rate (45%) taxpayer, that means paying tax at their marginal rate on income that is partly consumed by mortgage interest — effectively being taxed on profit they have not fully earned.
The result: a highly geared individual landlord can end up with a large tax bill even on a modest real profit. This is why higher-rate landlords in particular reconsidered how they hold property.
How is a limited company taxed differently?
A limited company holding buy-to-let property is not subject to Section 24. It deducts mortgage interest in full as an allowable expense, so it only pays corporation tax on the genuine profit after finance costs. For a geared portfolio, this can materially reduce the tax on rental income compared with holding the same properties personally as a higher-rate taxpayer.
The trade-off is that extracting profit from the company has its own tax cost — typically dividend tax when you draw money out. So the company structure is most efficient when you are reinvesting profit to grow, rather than drawing everything as income.
What is an SPV and why do lenders prefer it?
Most limited-company landlords use a special purpose vehicle (SPV) — a company set up solely to hold property, with the right standard industrial classification (SIC) codes. Specialist BTL lenders prefer SPVs because they are simpler to underwrite than a trading company with other activities. An SPV keeps the property business ring-fenced and makes the lender's security and due diligence cleaner.
- Full interest deduction against rental profit before corporation tax.
- Lower ICR: company borrowers are often stress-tested at 125% rather than the 145% applied to higher-rate individuals.
- Portfolio building: retained profit can be reinvested more tax-efficiently.
- Succession planning: shares can be structured for family involvement.
What are the downsides of company buy-to-let?
A limited company is not automatically better. Consider the costs:
- Higher mortgage rates and fees are common on limited-company products.
- Accountancy and filing costs for company accounts and corporation tax returns.
- Dividend or salary tax when you extract profit from the company.
- Transferring existing personal properties into a company can trigger capital gains tax and stamp duty, since it counts as a sale.
Because of the transfer costs, incorporation usually makes most sense for new purchases or for landlords planning to scale. Our guide on how many buy-to-let mortgages you can have covers portfolio structuring in more detail.
Who should consider a limited company?
Company buy-to-let tends to favour:
- Higher-rate and additional-rate taxpayers hit hardest by Section 24.
- Geared investors with significant mortgage interest to deduct.
- Landlords reinvesting profit rather than drawing it as income.
- Portfolio builders planning multiple properties over time.
Basic-rate taxpayers with little borrowing may find personal ownership simpler and cheaper. This is a decision to take with a qualified accountant — the right answer depends on your income, gearing, and long-term plans. If affordability is tight, our guide to top-slicing shows how personal income can support company borrowing.
How Assesr helps limited company landlords
Assesr builds a lender-ready credit paper in around 60 seconds for SPV and limited-company buy-to-let, models the 125% company stress test, and matches you to specialist lenders comfortable with corporate borrowers, personal guarantees, and portfolio structures. We charge a quarter of the typical broker fee: the 0.5% Assesr Fee, payable on drawdown, with nothing until completion. Assesr covers unregulated buy-to-let only in the UK; we do not provide tax advice, so speak to an accountant on structuring.
Frequently asked questions
Can a limited company deduct mortgage interest?
Yes. Unlike individual landlords, whose relief is restricted to a 20% basic-rate tax credit under Section 24, a limited company can deduct mortgage interest in full as a business expense against rental profit before corporation tax. This is the main tax driver behind SPV buy-to-let.
What is Section 24?
Section 24 is the rule that restricted mortgage-interest tax relief for individual landlords. Instead of deducting finance costs from rental income, individuals now receive only a 20% basic-rate tax credit. This can push higher-rate taxpayers into paying tax on profit they have not really made after interest.
Is it always better to buy through a limited company?
No. Company buy-to-let brings extra costs — accountancy, potentially higher mortgage rates, and tax on extracting profit as dividends. It tends to favour higher-rate taxpayers, geared portfolios, and those retaining profit to reinvest. Always take professional tax advice for your circumstances.