A company deducts its mortgage interest in full, which is the whole reason yours exists. The costs sit elsewhere: a divisor on the corporation tax limits nobody mentions, an annual charge on £500,000 dwellings, and dividend rates that rose in April 2026.
Interest relief in a company
Start with the part that is unambiguously true. Section 24 does not apply to companies. HMRC's Property Income Manual puts it plainly: companies carrying on a property business are not affected by the finance cost restriction. Mortgage interest is deducted in the ordinary way in arriving at taxable profit, so a geared company is taxed on something much closer to its real economic result than a geared individual is.
What follows that advantage is a second layer of tax and a set of charges that only apply to companies. Corporation tax first, since 1 April 2023:
What a landlord's SPVs pay then depends on one rule: both limits are divided by the number of associated companies, plus the company itself, and pro-rated for short accounting periods. Lenders encourage one special purpose vehicle per property or per mortgage, and each new vehicle shrinks the limits for every other company in the group.
| Companies in the group | Small profits limit | Upper limit |
|---|---|---|
| 1 | £50,000 | £250,000 |
| 2 | £25,000 | £125,000 |
| 4 | £12,500 | £62,500 |
| 5 | £10,000 | £50,000 |
A landlord with four SPVs, each making £30,000 of profit, budgets for 19% and gets marginal relief instead, because £30,000 sits between the divided limits of £12,500 and £62,500. Four companies, four computations, all wrong in the same direction. Establish the count before the next SPV is incorporated. See property company accounts.
The real cost
Money inside a property company is taxed once. Money in your hand has been taxed twice. Dividend rates rose on 6 April 2026: the ordinary rate from 8.75% to 10.75%, the upper rate from 33.75% to 35.75%, with the additional rate unchanged at 39.35% and the dividend allowance still £500.
An illustrative extraction. A single company with no associates makes £40,000 of profit and the shareholder already pays tax at the upper rate:
| Step | Figure |
|---|---|
| Company profit | £40,000 |
| Corporation tax at 19% | £7,600 |
| Available to distribute | £32,400 |
| Covered by the dividend allowance | £500 |
| Dividend tax at 35.75% on £31,900 | £11,404 |
| Total tax if fully extracted | £19,004 — 47.5% |
| Total tax if fully retained | £7,600 — 19% |
That gap is the whole argument. A property company is a machine for retaining and reinvesting profit, and a comparatively expensive way to fund a lifestyle. Any comparison with holding property personally that stops at the corporation tax line has left out more than half the tax.
Pulling the other way, from 6 April 2027 property income in personal hands gets its own income tax rates in England, Wales and Northern Ireland — 22%, 42% and 47% — while companies are not mentioned in that measure at all. For a landlord who retains profit, the corporate case strengthens from that date. For a landlord who draws everything, the April 2026 dividend rise dominates. The incorporation calculator models both, and our incorporation page covers the cost of getting there.
Incorporation relief under s.162 TCGA 1992 used to be automatic. For transfers of a business on or after 6 April 2026 a claim must be made in the transferor's self assessment return for the year of transfer, with brief details of the transaction, the tax computations and the type of business transferred. Section 162A TCGA 1992, the old election out, is repealed. A transfer made without the claim is a disposal at market value to a connected person.
Charges only companies pay
The Annual Tax on Enveloped Dwellings is payable mainly by companies owning UK residential property valued over £500,000. It also catches partnerships with a corporate partner and collective investment schemes, which is why a corporate partner introduced for an unrelated reason can bring a property into charge. Chargeable amounts for 1 April 2026 to 31 March 2027:
| Property value | Chargeable amount |
|---|---|
| £500,000 – £1m | £4,600 |
| £1m – £2m | £9,450 |
| £2m – £5m | £32,200 |
| £5m – £10m | £75,450 |
| £10m – £20m | £151,450 |
| Over £20m | £303,450 |
Whether a charge is payable, and what has to be filed, turns on how each property is held and used. Answer that for each property in the group, including those held by a letting company.
Two things apply to a company buying residential property in England or Northern Ireland. The higher rates apply to any residential purchase of £40,000 or more — there is no first-property exception for a company. And a 17% flat rate applies, for transactions with an effective date on or after 31 October 2024, to a higher threshold interest: a single dwelling with chargeable consideration over £500,000, or linked transactions aggregating above that. The old 15% figure is out of date, and on a £500,000-plus purchase the difference is five figures.
Reliefs are what take most genuine letting companies back onto the ordinary higher rates: property rental business; property developer or trader; property made available to the public in a trade; a financial institution acquiring in the course of lending; occupation by employees of the purchaser; farmhouse; and qualifying housing co-operative. Reliefs are subject to clawback, so the conditions have to keep being met after completion.
An illustrative purchase. A company buys a £600,000 flat in England to let. Without relief the 17% flat rate gives £102,000. With property rental business relief the higher rates apply: 5% on the first £125,000 (£6,250), 7% on the next £125,000 (£8,750) and 10% on the remaining £350,000 (£35,000) — £50,000. A £52,000 difference on one transaction. Figures are illustrative. Wales charges Land Transaction Tax and Scotland charges Land and Buildings Transaction Tax with an 8% Additional Dwelling Supplement, both on their own tables — the stamp duty calculator covers all three.
A new annual surcharge on owners of residential property in England worth £2 million or more, in four bands: £2,500 a year up to £2.5 million, £3,500 up to £3.5 million, £5,000 up to £5 million and £7,500 above £5 million. Revaluations are every five years, charges rise with CPI inflation from 2029/30, and fewer than 1% of properties in England are expected to be in scope. First bills are due to be issued in March 2028.
It is levied on the owner of the property, so unlike ordinary council tax it cannot be passed to the tenant. For a company holding high-value residential stock it adds to annual running cost, alongside ATED, and the cost can be worked out now, before the first bills in 2028.
Statutory accounts, corporation tax done with the divisor applied, and the extraction question answered with arithmetic.
We prepare statutory accounts and the CT600 for each company, and count associated companies before the computation.
Property company accountsWe work out dividends at 10.75% and 35.75%, salary and directors' loan accounts on the amount you need to draw.
Incorporation calculatorWe track income, interest and spend by building inside the company, so the accounts come straight from the records.
Property bookkeepingThe CGT on transfer at market value, the SDLT on market value, the Ramsay business test and the 6 April 2026 claim requirement.
IncorporationHigher rates from £40,000, the 17% flat rate over £500,000, and which relief takes you back to the ordinary table.
Stamp duty calculatorWe prepare self assessment for the shareholders alongside the company, so dividends are planned before they are paid.
Landlord tax returnsOne monthly fee for each company, set by how many properties it owns.
Yes. Section 24 restricts finance costs for individuals, trustees of accumulating or discretionary trusts and personal representatives. HMRC's Property Income Manual is explicit that companies carrying on a property business are not affected, so interest is deducted in the ordinary way in arriving at taxable profit. That is the advantage of the corporate route, and it is largest where the portfolio is geared. The profit is then taxed at corporation tax rates of 19% to 25%, and getting the money into your own hands costs dividend tax on top, at rates that rose on 6 April 2026.
Almost certainly the associated companies rule. Since 1 April 2023 the 19% small profits rate applies at or below £50,000 and the 25% main rate above £250,000, with marginal relief in between — but both limits are divided by the number of associated companies plus the company itself, and pro-rated for short accounting periods. A landlord running four SPVs divides by four: the limits become £12,500 and £62,500. A company with £30,000 of profit that expected 19% is then in marginal relief. Landlords who set up a separate SPV per mortgage are the group this catches most often.
More than it did. Dividend rates rose on 6 April 2026 to 10.75% at the ordinary rate and 35.75% at the upper rate, with the additional rate unchanged at 39.35% and the dividend allowance still £500. Take an illustrative company profit of £40,000 with no associated companies, taxed at 19%: corporation tax is £7,600, leaving £32,400. Paid out to a shareholder already taxed at the upper rate, £500 is covered by the allowance and £31,900 is taxed at 35.75%, which is £11,404. Total tax is £19,004, or 47.5% of the original profit. Left in the company it would have been £7,600.
It has to consider it. The Annual Tax on Enveloped Dwellings is an annual charge payable mainly by companies owning UK residential property valued over £500,000, and it also catches partnerships with a corporate partner and collective investment schemes. For the year from 1 April 2026 to 31 March 2027 the chargeable amounts are £4,600 for a property valued between £500,000 and £1 million, £9,450 up to £2 million, £32,200 up to £5 million, £75,450 up to £10 million, £151,450 up to £20 million and £303,450 above that. Whether a charge is payable depends on how the property is held and used.
It was, and it is now 17%. For transactions with an effective date on or after 31 October 2024 the single rate for companies and other non-natural persons is 17% on a higher threshold interest, meaning a single dwelling with chargeable consideration over £500,000, or linked transactions aggregating above that. Reliefs take most genuine letting companies back onto the ordinary higher rates, and property rental business is the relevant one. On a £600,000 English flat the difference is stark: 17% flat is £102,000 against £50,000 on the higher rates. Reliefs are subject to clawback.
A new annual charge from April 2028 on residential property in England worth £2 million or more. It has four bands, £2,500 a year up to £2.5 million, £3,500 up to £3.5 million, £5,000 up to £5 million and £7,500 above that, with revaluations every five years and fewer than 1% of properties in England expected to be in scope. It is levied on the owner of the property, so a property company pays it and its tenants do not. First bills are due to be issued in March 2028.
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FreeAgent PartnerWe check how the corporation tax limits divide across your companies, what the money you draw out costs in tax, and whether ATED or the 17% stamp duty rate affect anything you hold.
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