Limited Company (SPV) or Personal Name? UK Buy-to-Let 2026

This is the question every UK rental property buyer asks, and the one the internet answers worst. On one side, marketing content saying "a company is always better"; on the other, buyers frightened by the complexity. The truth: the right answer depends on your personal tax position, and for some investors an SPV would be a mistake. This guide explains the mechanism, the concrete numbers, and — what most content skips — the hidden costs.

The Reason for Everything: Section 24

This entire debate arises from a single legislative change. Before 2017, individual landlords could deduct mortgage interest from rental income in full. Section 24 of the Finance Act 2015 phased this out between 2017 and 2020 and replaced it with only a 20% basic-rate tax credit — regardless of your marginal tax rate.

The consequence is this: a higher-rate (40%) or additional-rate (45%) taxpayer now pays tax on income they never actually receive. Because all of your rental income is taxed, while the mortgage interest comes back only as a 20% credit. And the critical point: limited companies were not affected by this change. A company can still deduct the interest in full as a normal business expense. That is the single, real reason for the SPV boom.

The Concrete Numbers: How Big Is the Difference?

Let us leave the theory. For a higher-rate taxpayer with a property generating £20,000 of annual rent and £12,000 of annual mortgage interest:

The difference: roughly £4,080 a year. If you are building a portfolio and retaining that profit inside the company to reinvest, this compounds into serious capital over ten years. That is the maths that makes an SPV attractive.

Corporation tax rates: 19% on profits up to £50,000, 25% above £250,000, with marginal relief in between. Compared with 40–45% personal income tax, the gap is clear.

But: The Dividend Trap and the Hidden Costs

Now for the part the marketing content does not tell you. The calculation above assumes you leave the profit in the company. If you want to use the money personally (that is, if you want to live off your rental income), you have to extract it — and that is a second layer of tax. Dividend tax rates are 8.75% (basic), 33.75% (higher) and 39.35% (additional); the dividend allowance is only £500. When a higher-rate taxpayer extracts profit as dividends, most of the SPV's advantage closes.

The other real costs:

The Biggest Trap: Transferring an Existing Property into a Company

This is the most expensive mistake. "Moving" a property you already own personally into a company is not a free transaction; in law it is a sale. The consequences:

In most cases, these two costs eat the tax saving for years. There is an exception: Section 162 "incorporation relief", but it requires the activity to be a genuine "property business", and there is an important recent change: from 6 April 2026 this relief no longer applies automatically — it must be actively claimed on the tax return. If you are considering a transfer, consult a qualified tax adviser before taking any step.

Who Does It Suit, and Who Not?

A practical threshold: many advisers note that, for a higher-rate taxpayer, an SPV only begins to pay for itself once annual net rental profit across the portfolio exceeds roughly £15,000–£20,000. Below that, accountancy and mortgage costs can eat the saving.

The market direction is clear: SPV use has risen dramatically in recent years (one study found that between 2016 and 2025 the number of BTL limited companies in the UK rose roughly 332%, to over 400,000). Different sources give figures ranging from 43% to 75% for the SPV share of new BTL purchases (because of differing years and methodologies); but there is no dispute about the direction of travel.

Optivest Note: We must draw the boundary very clearly here. This is a tax structuring decision, and Optivest is not a tax adviser. Company or personal name, which structure suits you, whether to transfer — the answers depend on your personal tax position, residence status, income level and long-term plan, and can only be given by a qualified UK tax adviser (ideally an accountant specialising in property tax). Optivest's contribution is on the mortgage side: if you decide to buy through an SPV, our mortgage brokerage service helps you find the lenders who lend to SPVs and package your file correctly (this market is smaller than the personal one and requires expertise). Our legal support service handles the title and conveyancing side of the purchase. Make your tax decision with your adviser; we are on the financing and legal side of implementing it.

Important notice — not tax advice: This article is for general information only and does not constitute tax, legal or investment advice. The calculations here are simplified examples; tax rates, bands and rules change (for example, separate tax bands for property income have been announced to take effect in 2027). Choosing the wrong structure, or a mistaken transfer, can cost tens of thousands of pounds in unnecessary tax. Before deciding, you must consult a qualified UK tax adviser/accountant. Your property may be repossessed if you do not keep up mortgage repayments. Optivest does not provide tax advice.

Frequently Asked Questions

Is an SPV always better?

No. An SPV is mainly advantageous for investors who are higher/additional-rate taxpayers, building a portfolio and reinvesting the profit. For a basic-rate taxpayer, the 20% interest credit already largely neutralises Section 24's effect; in that case the company's extra costs can exceed the saving.

Does the advantage survive if I extract the profit?

It largely closes. Extracting profit from the company is a second layer of tax: dividend tax at 8.75%/33.75%/39.35% (with only a £500 allowance). An SPV's real power appears when you retain and reinvest the profit; if you need to live off your rental income, the advantage weakens.

What does running a company cost?

Incorporation is cheap (a small fee at Companies House), but the real cost is ongoing: annual accountancy and compliance of roughly £500–£1,500, plus Companies House accounts and a corporation tax return (CT600). The SPV mortgage market is also smaller, and lenders usually require a personal guarantee.

Can I transfer my existing property into a company?

Technically yes, but it counts as a "sale" and is expensive: SDLT again at market value, and probably personal CGT. Section 162 incorporation relief may be an exception, but it requires a genuine "property business" and, from 6 April 2026, is no longer automatic; it must be actively claimed on the return. Take advice before any step.

Should I use an SPV as a foreign investor?

This adds extra layers: companies always pay the higher rates of SDLT on residential purchases (the total burden is heavier still for a foreign company), ATED comes into play on dwellings over £500k, and an offshore structure does not automatically protect against inheritance tax (IHT). This area is complex and requires an adviser specialising in international property tax.

In Summary, and How to Reach Us

The only real rationale for an SPV is Section 24: companies deduct mortgage interest in full and pay 19–25% corporation tax, while individual landlords get only a 20% credit and may pay 40–45%. For a higher-rate taxpayer building a portfolio, that is thousands of pounds a year. But if you extract the profit, dividend tax closes the advantage; accountancy, personal guarantees, ATED and — most expensive of all — the cost of transferring an existing property must all be counted. For a basic-rate taxpayer or a single-property owner, an SPV usually does not make sense.

This is a tax decision and requires a qualified tax adviser; Optivest does not provide tax advice. But if you decide to proceed via an SPV, our mortgage brokerage service finds the right lender and our legal support service runs the purchase. Contact us or reach us on WhatsApp. See our mortgage brokerage service, our legal support service, and our NRL Scheme guide for the tax side.