July 14th 2025
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The Advantages & Disadvantages of Investing In a Limited Company
Setting up a limited company for property investment can prove to be a smart move.
But while the majority of ambitious investors choose the limited company route, you should weigh up the potential pros and cons before making a commitment.
To guide you towards the best decision for your property investment needs, here we explore the advantages and disadvantages of setting up a limited company.
What we’ll cover here
First, let’s look at the potential advantages of setting up a buy-to-let limited company as a landlord and property investor.
Swerve your way around Section 24
Section 24 of the Finance Act 2015 presents a financial roadblock for many landlords, particularly those letting out multiple properties. Commonly known as ‘Tenant Tax’, this legislation removes the landlord’s right to deduct related expenses, including mortgage interest,t from their total rental income.
Setting up a limited company means you can potentially offset 100% of your mortgage interest, reducing profits and the amount of tax paid from your rental income. As you’ll likely agree, this is a significant plus-point.
More favourable taxation rates for higher-rate earners
Operating as a property limited company could be favourable if you’re a higher-rate earner or you aim to hold multiple properties.
Why? It’s because when you own a property in your name personally, rental profits are added to your additional earnings (your main job, for instance) and subject to income tax.
On the other hand, the income of your limited company isn’t taxed at your personal tax rate, but at the current rate of corporation tax, which is typically around half of the higher rate.
Better and more sustainable portfolio growth
If you are a higher-rate earner and plan to scale your buy-to-let empire, setting up a limited company can be a far more efficient way to achieve your goals.
You can retain your profits within the company to fund future investments without them being subject to income tax (until you decide to withdraw earnings from the company).
Retaining earnings within a limited company also helps to protect them from tax liabilities so that you can repay incurred debts and grow your property portfolio faster.
More flex in tax planning and saving
If you’re the director of your own limited company for property, you’ll have more autonomy over how you handle the profits.
You’ll have the choice to invest in more properties, place a portion of your income into a tax-efficient pension or release your profits strategically using dividends. This level of flexibility offers far more flexibility in your tax planning compared to owning properties personally.
Personal property investment vs tax obligations at a glance
| Stage of investment | Tax charge | Personally owned | Limited company invested |
|---|---|---|---|
| Buying | Stamp Duty Land Tax (SDLT) | 3% surcharge | 3% surcharge |
| Selling | Capital Gains Tax | £0 to £3,000 Tax free Gains over £3,000 | Basic rate taxpayer: 18% Higher & Additional rate taxpayer: 24% | 19% to 25% (Corporation tax) |
| Letting / Earning income | Income Tax | £0 to £12,750 Tax free: 0% £12,571 to £50,270 | Basic rate: 20% £50,271 to £125,140 Higher rate: 40% £125,140+ Additional rate: 45% | 19% to 25% (Corporation tax) |
| Estate planning | Inheritance tax (IHT) | 40% above £325,000 seven-year taper on gifts | Same but based on the value of shares held |
Possible inheritance tax and legacy savings
If you have a limited company for property, you’ll typically have more options when it comes to paying IHT.
If you want to pass your business on to your family one day, it’s much easier to transfer to a limited company than privately held property. In this situation, as the property remains owned by the company, you could also avoid stamp duty, inheritance tax, and capital gains tax liabilities.
Depending on your company’s structure, you can even add your children and grandchildren as company shareholders.
Read: Social housing vs. private investments: a comparative guide for investors
Studies show that in Q4 of 2024, a whopping 74% of buy-to-let investors planned to purchase properties through a limited company. This year, at least 69% of budding landlords plan to use a limited company to buy property.
To break that down further, one in 10 buy-to-let property investors surveyed confirm they own all of their properties through a property Ltd company.
But, while (as I’ve explored), investing in property through a limited company offers its fair share of perks, there are some potential pitfalls you should know about.
Less impact on taxation rates for basic rate earners
If you’re a basic rate taxpayer and you’ve invested in one or two properties, running your venture through a limited company may not be particularly cost-efficient.
Basic rate taxpayers are usually less affected by Section 24. That said, if you’re happy with your rental profits and your current portfolio, you could be better off keeping things personal.
While this may be the case, if your salary and rental income starts to increase, you could end up moving into the higher rate tax bracket—which means switching to a limited company could be a wise move.
In a recent article, property expert Jones Robinson noted that many landlords are taking action to navigate Section 24 more efficiently:
“In response to these changes, some landlords are transferring properties into limited companies or shifting investments to holiday lets and commercial properties, where different tax rules apply.”
– Jones Robinson
Additional legal red tape and costs to consider
As a limited company owner, there are often extra legal considerations to navigate and additional operational costs to cover. These include:
- Company formation, administration and paperwork
- Company set-up costs and fees (typically between £12 and £71)
- Larger mortgage deposits of around 45 to 50%
- Higher mortgage rates to consider (although in most cases, you can offset these costs as a tax-deductible expense)
- Specialist accountants to file your annual accounts and filings
FYI
When selling a property through a limited company, you don’t get a tax-free capital gains allowance (you do if you’re selling it personally). But usually the tax rate is slightly lower.
You get taxed double when taking a salary and dividends
If you pay yourself a salary and dividends as a limited company owner, you can technically end up paying ‘double tax’.
Why? As a limited company owner, you’re required to pay corporation tax. When you take out profits in the form of a salary or dividends, you’ll also need to pay income tax on these ‘earnings.’
This is certainly something worth thinking about if you plan on paying yourself a regular income from your buy-to-let limited company.
Buy-to-let mortgages can be more expensive
As I mentioned earlier, securing buy-to-let mortgages can be more expensive through a limited company as higher interests and additional fees usually apply.
On the flip side, lenders’ stress testing is often more lenient to limited companies than personal investors, which could increase your chances of securing a good deal.
If you do decide to set up a company for property, I have some insider tips that could help make your investment journey more efficient. Let’s start with making your partner a director.
Make your property investment partner a director
In addition to having a strategic partner that you can work with to develop the business, making your investment partner a director can provide more financial planning and tax flexibility.
These advantages include added flexibility when financing properties (director’s loans) and more strategic flexibility when withdrawing profits from the company.
It’s a smart tax move…
“There are several good reasons to invest in a property as a limited company, and importantly, make your investment partner a director. It allows you a lot of flexibility when it comes to tax when you are looking to withdraw profits tax efficiently from the company.”
– Jessica Chambers, Investment Sales Manager of The Property Sourcing Company
Have a clear understanding of your property investment goals
Before you make a firm decision on whether to set up a limited company, you should take the time to set clear property investment goals.
The level of ongoing investment you plan to make and how many properties you’re looking to secure in a set timeframe will have a direct impact on your tax obligations and financial planning.
According to financial experts at Reflex Accounting, you should “ set up as a limited company if you are aiming to build a large portfolio of properties, retain profits within the company to reinvest, and minimise tax on rental income and capital gains.
But if you rely on income from your properties to pay the bills, then leaving the property in your name might still be the best way.”
However, every situation is different and you should weigh up your personal investment goals and circumstances before making a firm decision.
Bonus tip: Watch our show episode, featuring our guest property expert Lisa Calvert, Partner at FCF Accountants, on what to consider when setting up a property from a tax perspective:
If you decide to set up a limited company for property investments, here are the essential steps you’ll need to navigate:
- Choose a company name
- Appoint company directors
- Appoint company shareholder or guarantors
- Choose and office address and confirm your company’s proposed business activities
- Prepare your Memorandum and Articles of Association
- Register with Companies House and HMRC
- Get professional advice on accounting, paperwork, and your legal obligations
FYI: If you need trusted tax advice and professional assistance in setting up a limited company as a property investor, contact FCF.
Disclaimer
This advice is based on our experience and knowledge as property investment professionals and is here to help guide your decisions. However, we’re not legal advisors or tax experts. You should always seek assistance from registered tax or legal professionals before making any firm commitments or decisions.
Bonus tip: Whether you decide to make investments personally or set up a limited company, making your next purchase through the Property Sourcing Company is a wise move.
We have an ever-expanding portfolio of quality properties across the UK, many of which are around 15 to 20% below market value.
You won’t find these properties on your usual third-party property listing sites like Rightmove and we have a wide range of properties to suit every investor goal and budget. Contact us today—we look forward to helping you start your journey.
To set up a limited company as a property investor in the UK, you’ll need to register it with Companies House. When registering your company, you’ll also need to define its structure (directors, shareholders, etc.) and prepare your governing documents. We recommend navigating this part of the process with the guidance of an accountant or solicitor to ensure you remain compliant and as tax-efficient as possible.
Fundamentally, there are two key types of property investor:
a. Someone who acquires one or two properties and plans on managing those investments only going forward.
Someone who plans on growing their property portfolio over time and taking on multiple properties.
If you fall into the property investor ‘a’ category, setting up a limited company may not be the best choice due to the additional red tape and paperwork. However, if you fall into category ‘b’, you should set up a limited company from the offset to ensure your property investment activities are flexible and financially efficient.
Yes, setting up a limited company as a property investor can absolutely be worth it. However, there are some pros and cons to consider before making a firm decision. If you’re a higher-rate taxpayer and you plan to invest in multiple buy-to-let properties, setting up a limited company is typically more tax-efficient. If you’re unsure which route to take, read this full guide on the subject and get the advice of a financial expert.
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