If you are buying your first buy-to-let property, one of the first decisions you will face is how to own it, in your personal name or through a limited company.
This choice can affect your tax bill, mortgage options and long-term profits, so it is important to get it right from the start.
In this guide, we compare both options, explain the pros and cons, and show how Sourced Enterprise can help you choose the most tax-efficient path.
Owning a Buy-to-Let in Your Personal Name
When you buy a property in your own name, you own it as an individual. Your rental income is added to your personal income and taxed at your income tax rate.
Advantages
▪ Simple setup: You can buy the property immediately without forming a company
▪ Lower initial costs: No company formation fees or extra administration
▪ Wider lender choice: More lenders offer personal buy-to-let mortgages, especially for first-time landlords
Disadvantages
▪ Higher tax for higher earners: Rental profits are taxed at 20%, 40% or 45%, depending on your income
▪ Limited mortgage interest relief: You can no longer deduct full mortgage interest from rental income, instead you receive a basic rate tax credit
▪ Less flexibility for portfolio growth: Adding more properties may push you into a higher tax bracket quickly
Owning a Buy-to-Let Through a Limited Company
A limited company is a separate legal entity. The company buys and owns the property, and you own the company through its shares.
Advantages
▪ Potential tax efficiency: Profits are taxed at corporation tax rates, which can be lower than higher-rate personal tax
▪ Full mortgage interest relief: Companies can deduct mortgage interest as an allowable expense
▪ Easier portfolio growth: Profits can be reinvested in more properties without paying personal income tax until you take the money out
Disadvantages
▪ Higher setup and admin costs: You need to register a company and file annual accounts
▪ Specialist mortgage market: Fewer lenders operate in the limited company buy-to-let space, and rates can be slightly higher
▪ Tax on profit withdrawals: When you take profits out as dividends, personal tax may apply
Which Is Best for You?
There is no one-size-fits-all answer.
If you are planning one or two properties and want minimal administration, buying in your personal name can be simpler.
If you aim to build a portfolio and want to keep profits in the business for reinvestment, a limited company may offer better tax efficiency over the long term.
Pro Tip: The most tax-efficient option depends on your income, long-term plans and whether you need the rental income personally right now.
How Sourced Enterprise Can Help
At Sourced Enterprise, we work with new and experienced investors to choose the right ownership structure for their buy-to-let portfolio. We can help you:
▪ Compare personal vs company ownership based on your specific numbers
▪ Set up a Special Purpose Vehicle (SPV) company correctly for property investment
▪ Access a network of mortgage lenders for both personal and company buy-to-let deals
Book your free consultation today and find out which structure will keep more of your rental profits in your pocket.
Author
Chris Kirkwood
