Buying UK Property Through a Company or SPV: How the Tax Really Compares in 2026
Holding UK property in a limited company, often a special purpose vehicle (SPV) set up for one property or scheme, means profits are taxed at corporation tax rates of 19% to 25% and mortgage interest is deducted in full. An individual landlord of residential property pays income tax of up to 45% and only gets basic-rate relief on finance costs. The catch is that getting money out of a company costs more tax, and companies pay more stamp duty and, on expensive homes, an annual charge.
So a company usually suits investors who borrow heavily, reinvest profits and hold for the long term, and suits developers who build to sell. It often does not suit someone who needs every pound of rent as personal income. Budget 2025 moved the numbers in favour of companies for landlords: higher property income tax rates for individuals from April 2027, but also higher dividend tax from April 2026.
Individual or company: the main differences
| Point | Individual landlord | Company or SPV |
|---|---|---|
| Tax on rental profit | Income tax: 20% / 40% / 45% in 2026-27; property rates of 22% / 42% / 47% from 6 April 2027 | Corporation tax: 19% up to £50,000 of profit, 25% above £250,000, marginal relief between |
| Mortgage interest on residential lets | Not deducted; a tax reduction at the basic rate instead (20% now, 22% from April 2027) | Deducted in full against profits |
| Mortgage interest on commercial lets | Deducted in full | Deducted in full |
| Getting profit out | Already yours after tax | Dividends taxed at 10.75% / 35.75% / 39.35% from 6 April 2026, after a £500 allowance; or salary, or repaying loans you made to the company |
| Gains on sale | Capital gains tax at 18% or 24% | Corporation tax on the gain, then tax again on extraction |
| Stamp duty on dwellings | Higher rates if you own another home | Always higher rates; 17% flat on a dwelling over £500,000 unless a relief applies |
| Annual Tax on Enveloped Dwellings | Not applicable | Applies to dwellings worth over £500,000 unless a relief is claimed |
Why interest relief drives the decision
Since 6 April 2020 individual landlords of residential property cannot deduct mortgage interest from rental income. They get a tax reduction worth the basic rate of the interest instead. HMRC's property manual is explicit that "Companies carrying on property business are not affected", and that loans wholly for commercial property are outside the restriction too.
For a higher-rate taxpayer with a large mortgage, the restriction can push the effective tax rate on the real profit well above 40%. A company deducts the interest and pays corporation tax only on what is left.
From 6 April 2027, individuals will pay separate property income rates of 22%, 42% and 47%, set by the Finance Act 2026, with finance cost relief given at 22%. Companies are not affected by that change.
Very large borrowers should note one company-side limit: the corporate interest restriction, which does not bite while net interest is under £2 million a year.
The costs of using a company
- Double tax on extraction. Profits taxed at 25% in the company and then as dividends at 35.75% in the hands of a higher-rate shareholder leave noticeably less than the headline corporation tax rate suggests. A company works best when profits stay in to pay down debt or fund the next purchase.
- Stamp duty. A company always pays the higher residential rates, and a flat 17% on a dwelling over £500,000 unless it qualifies for a relief such as a property rental business or development for sale. See our guide to stamp duty for property investors.
- ATED. A company holding a dwelling worth over £500,000 is within the Annual Tax on Enveloped Dwellings. For 2026-27 the charges are £4,600 (£500,001 to £1 million), £9,450 (to £2 million), £32,200 (to £5 million), £75,450 (to £10 million), £151,450 (to £20 million) and £303,450 above that. Letting to unconnected tenants on commercial terms and developing for resale are relieved, but the relief must be claimed on a return each year, normally by 30 April. Budget 2025 removed the time limit for claiming relief, but late returns still attract penalties.
- Finance and admin. Lenders price company mortgages differently and usually ask for personal guarantees. Accounts, a corporation tax return and a confirmation statement are needed every year.
- Moving existing property in. Transferring property you already own into a company is a sale at market value: it can trigger capital gains tax and stamp duty. Incorporation relief exists for genuine property businesses, and from 6 April 2026 it must be actively claimed.
Worked example
Illustrative example only, with round numbers. One year, residential let, everything else ignored.
Rent £100,000, mortgage interest £40,000, other costs £10,000. The owner is already a higher-rate taxpayer from other income and stays below the additional-rate threshold. The company has no other income.
| Individual (2026-27 rates) | Company | |
|---|---|---|
| Taxable profit | £90,000 (interest not deducted) | £50,000 |
| Tax on profit | £36,000 at 40% | £9,500 at 19% |
| Finance cost relief | minus £8,000 (20% of £40,000) | none needed |
| Tax on the property | £28,000 | £9,500 |
| Left after tax | £22,000 | £40,500 in the company |
| If all paid out as a dividend (35.75%, after the £500 allowance) | £14,300 more tax, leaving £26,200 |
The company leaves far more cash to reinvest. Paid out in full, the gap narrows. That is the whole decision in miniature.
When a company tends to suit, and when it does not
| Usually suits | Usually does not suit |
|---|---|
| High borrowing on residential lets | Unmortgaged property and an owner who needs the income |
| Profits reinvested into more property or development | Basic-rate taxpayers with modest portfolios |
| Developers building to sell, with profits recycled into the next scheme | A single home over £500,000 that a family member will use |
| Joint ventures and investors who want a ring-fenced vehicle per scheme | Existing portfolios with large gains that would crystallise on transfer |
| Family succession planning through shares (see our inheritance tax guide) | Investors who want simple paperwork |
An SPV per scheme is common in development because lenders and joint venture partners want the asset, the debt and the contracts in one clean entity. Our guides to development finance and joint venture agreement terms explain why.
How we work with SPVs
Most of the developers and investors we work with build through a company. We contract with the SPV, report cost and programme in the form lenders and monitoring surveyors expect, and price work unit by unit so the company's accountant can separate capital and revenue items. Our development feasibility and site appraisal gives the SPV's lender and investors the cost and programme evidence they ask for, our development management service runs the scheme on the owner's behalf, and our turnkey design and build contracts give one fixed price for design and construction. If you are looking at a site or building, the free Investor & Developer guide explains how we work.
