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Limited company or personal name? How Section 24 changes a landlord's numbers

One property, the same rent, interest and costs, held in your own name and in a limited company: a side by side look at what Section 24, corporation tax and dividend tax leave you with.

Stresst Editorial7 min read
Limited company or personal name? How Section 24 changes a landlord's numbers

Put the same buy-to-let in your own name and in a limited company, and the rent, mortgage interest and running costs stay exactly the same. What changes is how the tax is worked out, and for many landlords that difference is now the biggest number in the deal. Here is how the two structures compare, line by line.

Why the structure matters

Section 24 of the Finance (No. 2) Act 2015 restricts the relief individual landlords get for finance costs on residential property. Tax is worked out on your rent minus your other allowable costs, with the mortgage interest left in, and you then get a tax reduction at the basic rate, currently 20%, on your finance costs. HMRC's Property Income Manual is clear that companies carrying on a property business are not affected: a company deducts its interest as a cost in the normal way.

The personal name side is also getting more expensive. From 6 April 2027, property income will have its own income tax rates. Budget 2026 announced 24% basic, 44% higher and 49% additional for England, Wales and Northern Ireland, to be legislated in Finance Bill 2026 to 2027.

One property, two structures

Our example property is let for £20,000 a year, with £10,000 of mortgage interest and £3,000 of other allowable costs such as letting fees, repairs and insurance. Profit before tax is £7,000 either way.

In your own name, tax is worked out on £17,000 (rent minus other costs) at your band, and 20% of the £10,000 interest, £2,000, comes off the tax.

In a company, the interest is deducted in full, so corporation tax is charged on the £7,000 profit. At this level of profit the small profits rate of 19% applies, giving £1,330. That leaves £5,670 in the company. If all of it is paid to you as dividends, dividend tax is charged at your band's dividend rate after the £500 dividend allowance.

These are the figures from the Stresst Ltd vs Personal Name calculator for the 2026 to 2027 tax year, for a UK resident landlord:

2026 to 2027Basic rate (20%)Higher rate (40%)Additional rate (45%)
Profit before tax£7,000£7,000£7,000
Own name: income tax after the 20% credit£1,400£4,800£5,650
Own name: net after tax£5,600£2,200£1,350
Company: corporation tax at 19%£1,330£1,330£1,330
Company: dividend tax (10.75%, 35.75%, 39.35%)£556£1,848£2,034
Company: net after tax, all profit paid out£5,114£3,822£3,636

What the numbers show

For a basic rate taxpayer, Section 24 makes no difference on these figures: £3,400 of tax on £17,000, less the £2,000 credit, is £1,400, the same as 20% of £7,000. Holding personally leaves £5,600, which is £486 more than the company once all the profit is paid out as dividends.

For a higher rate taxpayer, the picture changes. Section 24 adds £2,000 a year to the personal tax bill, about £167 a month, leaving £2,200. The company route leaves £3,822 after corporation tax and dividend tax, which is £1,622 a year more.

For an additional rate taxpayer, the personal figure falls to £1,350 against £3,636 through the company, a gap of £2,286 a year.

Because the credit is fixed at 20%, the gap widens as your tax band and your interest bill grow. On figures like these, the numbers tend to favour a company structure for higher and additional rate taxpayers with significant mortgage interest. Profit that stays in the company has only had corporation tax taken off, so £5,670 is available to reinvest, for example towards a deposit on the next property.

The rates behind the figures

For 2026 to 2027, GOV.UK sets the Personal Allowance at £12,570, the basic rate at 20% up to £50,270, the higher rate at 40% up to £125,140 and the additional rate at 45% above that. Property income is taxed at these main rates this tax year.

For the financial year starting 1 April 2026, corporation tax is 19% on profits of £50,000 or less and 25% on profits over £250,000, with marginal relief in between. Those limits are reduced for short accounting periods and for companies with associated companies. The dividend allowance is £500, and dividend rates are 10.75%, 35.75% and 39.35%.

The calculator applies one tax band to the whole rental profit and does not include the Personal Allowance or your other income, so it gives a clear like for like comparison of the two structures rather than a full tax return.

From April 2027: the personal name side

The Stresst calculator works on 2026 to 2027 rates. As an illustration worked out separately, at the new property rates the tax on the same £17,000, before any finance cost credit, would be £4,080 at 24%, £7,480 at 44% and £8,330 at 49%, which is £680 more in every band. The rate of the finance cost credit from 6 April 2027 is not stated in the Budget 2026 documents we checked, so this illustration stops before the credit.

On the company side, Budget 2026 shows the corporation tax rates and limits, the dividend allowance and the dividend rates unchanged for 2027 to 2028.

The full picture before you compare

A fair comparison looks at the whole journey, not just the tax line.

  • Taking money out. Company profit is taxed twice if you draw it: corporation tax first, then dividend tax. The table includes both.
  • Mortgage rates. Limited company buy-to-let mortgage rates are often different from personal ones, and a different rate changes the interest figure the whole comparison rests on.
  • Moving a property you already own. If you control the company, you and it are connected. For capital gains tax, a transfer between connected persons is treated as not at arm's length, so it is a disposal at market value and capital gains tax can apply. For stamp duty land tax, a purchase by a connected company is charged on at least market value.
  • Running costs. A company has its own accounts and filings to pay for each year.

For your own tax position, speak to a qualified UK tax adviser.

Run your own numbers in Stresst

The Ltd vs Personal Name - Section 24 calculator is a Premium tool that puts your own rent, interest, costs and tax band through both structures side by side, with a choice of corporation tax rates. The Buy-to-Let calculator, which covers yield and cash flow, is free.

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Sources

This article is general information only and is not financial, tax or legal advice.

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