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Section 24 & Ltd Company
Tax Comparison

Personal ownership vs limited company — modelled precisely for UK landlords. Annual tax saving, payback period on incorporation costs, and 10-year cumulative projection. HMRC mortgage interest restriction (Section 24) built in.

Section 24 Modelled Ltd Co Comparison Annual Saving Payback Period 10-Year Projection Incorporation Costs
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Your Portfolio Details

1 · Portfolio Income
Number of Propertiestotal portfolio
props
Total Annual Rental Incomecombined all properties
£
Total Mortgage Interestcombined all mortgages/year
£
Other Allowable Expensesmaintenance, insurance, agent fees
£
2 · Tax Rates
Personal Income Tax Band
Corporation Tax Rate19% under £50k profit
%
Dividend Tax Rate8.75% basic / 33.75% higher
%
3 · Limited Company Structure
Mortgage Rate Premiumabove personal rate, typically 0.5–1%
%
Annual Accounting Feestypically £800–2,000/year
£
Annual Salary from Company£0 = dividends only
£
Annual Dividends Withdrawnamount taken out per year
£
4 · One-Off Incorporation Costs
CGT on Transfer to Companyestimate — varies by gain
£
SDLT on Transferadditional property rates on each
£
Refinancing Costsnew Ltd Co mortgages per property
£
Legal & Other Setup Costssolicitor, company formation
£
↓ Methodology ↓
How this calculator works — formulas & sources
Section 24 — Individual Tax
Taxable Income = Gross Rental Income (mortgage interest NOT deductible)
Income Tax = Taxable Income × Tax Rate
Tax Credit = Mortgage Interest × 20%
Net Tax Liability = Income Tax − Tax Credit
Since April 2020, individual landlords cannot deduct mortgage interest as a business expense. The 20% tax credit only partially offsets the cost for higher-rate taxpayers. A 40% taxpayer effectively pays 20% tax on every pound of mortgage interest paid to the bank.
Limited Company Tax
Taxable Profit = Gross Rent − All Expenses − Mortgage Interest (fully deductible)
Corporation Tax = Taxable Profit × 19% (profits ≤£50k)
Dividend Tax = (Profit After CT − £500 allowance) × Dividend Rate
Limited companies are fully exempt from Section 24 — mortgage interest is deductible in full as a business expense. Corporation tax: 19% for profits up to £50,000; marginal relief between £50–250k; 25% main rate above £250,000. Dividend allowance: £500 from April 2024.
Annual Saving
Annual Saving = Individual Net Tax − Ltd Co Total Tax
Ltd Co Total Tax = Corporation Tax + Dividend Tax (if extracting profits)
The annual saving represents the difference in total tax paid under each structure for the same rental income. The saving grows with mortgage interest levels and tax band — it is largest for 40–45% taxpayers with high LTV portfolios.
Payback Period
Payback Period = Total Incorporation Costs ÷ Annual Saving
Incorporation Costs = CGT + SDLT + Refinancing + Legal
The payback period is how many years of tax saving are needed to recover the one-off costs of transferring properties into a company. Typical payback ranges from 3–8 years. For new properties bought directly into a Ltd Co, payback is immediate — no transfer costs apply.
10-Year Cumulative Saving
Cumulative Saving (Year n) = (Annual Saving × n) − Incorporation Costs
Positive = Ltd Co is ahead · Negative = still in payback period
The 10-year projection shows when the Ltd Co structure breaks even and how far ahead it is by year 10. This is the most important figure for the decision — a short-term high payback cost can still be worthwhile if the annual saving is large.
Incorporation Relief
Incorporation Relief: Defers CGT when transferring a property business to a company
Conditions: Must be a genuine business (not passive investment)
SDLT still applies at full market value regardless of relief
Incorporation Relief under TCGA 1992 s162 can defer CGT if HMRC accepts the portfolio as a trading business. The bar is high — most portfolios do not qualify. SDLT cannot be deferred under any relief for residential property transfers to a company. Always seek specialist tax advice before incorporating.
Sources: Finance Act 2015 §24 (Section 24) · Corporation Tax Act 2010 · TCGA 1992 s162 (Incorporation Relief) · HMRC Property Income Manual PIM2058 · HMRC CTM03500 (Corporation Tax rates)
Last reviewed: April 2026

Tax Comparison

Annual Saving (Ltd Co vs Personal)
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⬤ Calculating…
Payback Period
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years to recoup costs
One-Off Costs
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total incorporation
Personal Ltd Co
10-Year Cumulative Income
Personal Ltd Co
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How it works

Section 24 and why it matters

Section 24 changed UK landlord taxation permanently. Here's what it means, how the numbers work, and when a limited company actually helps.

01 — SECTION 24
The mortgage interest trap

Since April 2020, individual landlords cannot deduct mortgage interest from rental income. Instead they receive a 20% tax credit on the interest amount. For 40% taxpayers this means paying 20% extra tax on every pound of mortgage interest — you pay tax on money that went to the bank. This calculator models this precisely.

02 — LIMITED COMPANY
Full interest deduction restored

Companies are exempt from Section 24. Mortgage interest is fully deductible against rental income before corporation tax. The effective tax rate (19% corporation tax) is also lower than higher-rate income tax (40%). But companies come with extra costs — accounting fees, mortgage rate premiums, and dividend tax when you extract profit.

03 — INCORPORATION COSTS
The one-off hurdle

Moving existing properties into a company triggers CGT (on any gain above original purchase price), SDLT at additional property rates on full market value, and refinancing costs because existing mortgages cannot transfer. These can easily total £30,000–60,000. Incorporation Relief may defer CGT if conditions are met — but SDLT still applies. Always get specialist advice before committing.

04 — PAYBACK PERIOD
The only metric that matters

The annual tax saving is only half the picture. Dividing the total one-off incorporation costs by the annual saving gives you the payback period — how many years before you've recouped what you spent. Under 7 years is strong. 7–12 years is reasonable for long-term holders. Above 15 years means you need to be very confident about holding the portfolio indefinitely.

05 — EXTRACTION TAX
Profit in the company vs in your pocket

Corporation tax (19%) is levied on company profit. When you extract that profit as dividends, dividend tax applies on top: 8.75% basic rate, 33.75% higher rate, 39.35% additional rate above a £2,000 allowance. The total effective rate on profit-to-pocket is often similar to personal income tax — the saving comes from Section 24 deductibility, not necessarily from a lower total tax rate.

06 — WHO BENEFITS MOST
When Ltd Co clearly wins

Higher-rate taxpayers (40%+) with significant mortgage debt relative to rental income benefit most — Section 24's bite is largest here. New investors buying through a company from day one avoid all transfer costs entirely. Long-term holders (10+ years) have time to recoup the payback period. Those reinvesting profit rather than extracting it benefit from leaving money in the company at 19% rather than paying 40% income tax.

FAQ

Common questions

What is Section 24 and how does it affect me?
Section 24 (the Finance Act 2020 mortgage interest restriction) means that individual landlords can no longer deduct mortgage interest as a business expense. Instead, you receive a 20% basic rate tax credit on the interest amount. For a 40% taxpayer, this means paying 20% tax on every pound of mortgage interest — money that went to the bank, not to you. For additional rate (45%) taxpayers the effective extra tax on each pound of interest is 25%. Limited companies are completely exempt from Section 24.
Should I move my properties into a limited company?
It depends entirely on your numbers, tax band, mortgage level, and how long you plan to hold. Basic rate (20%) taxpayers get no benefit — the 20% Section 24 credit exactly offsets the tax. Higher-rate (40%+) taxpayers with significant mortgage debt see the biggest saving. But moving existing properties triggers CGT, SDLT, and refinancing costs that can total £30,000–60,000. The key question is always the payback period — divide your total one-off costs by the annual tax saving. Under 10 years generally makes sense for long-term holders. This calculator gives you that number.
What is Incorporation Relief and can I avoid CGT?
Incorporation Relief (TCGA 1992 s162) can defer CGT when you transfer a property business to a company — but conditions are strict. You must transfer the whole business (not individual properties), must have been carrying on a genuine letting business (not passive investment), and all assets must transfer simultaneously. Even if you qualify, SDLT cannot be deferred — it still applies at full additional property rates on market value. Given HMRC scrutiny of this relief for property portfolios, specialist tax advice is essential before assuming you qualify.
What is the corporation tax rate for property limited companies?
For companies with profits up to £50,000, the corporation tax rate is 19%. Profits between £50,000–250,000 are taxed at a marginal rate (effectively 26.5% on the profits in this band). Above £250,000, the main rate is 25%. If your rental profits are modest (under £50,000 after all deductions including mortgage interest and expenses), the 19% rate applies — but remember that profit retained in the company faces dividend tax when extracted.
How does the mortgage rate premium for Ltd Co affect the comparison?
BTL mortgages in a limited company name typically carry a rate premium of 0.5–1.0% above personal rates. On a £200,000 loan, that's £1,000–2,000 per year in extra interest before any tax saving. This calculator estimates the premium cost based on your total mortgage interest and the rate premium you input. In practice, you'd need to refinance each property to a new Ltd Co mortgage product, and current products tend to carry this premium. A specialist HMO or BTL mortgage broker can give you exact current rates for Ltd Co products.
Is it better to buy new properties in a company from the start?
Yes, for most higher-rate taxpayers building a portfolio. Buying through a company from day one avoids all transfer costs (no CGT, no SDLT, no refinancing). You get the Section 24 benefit on every property from purchase. The only downside is slightly higher mortgage rates on Ltd Co products — but these are a known, ongoing cost rather than a large one-off. Most experienced property investors building significant portfolios now structure from the start through a limited company rather than incorporating later.