Limited Company vs Personal Name Buy-to-Let Mortgages: Pros and Cons Explained

If you’re planning to invest in a buy-to-let property in Oxford or anywhere in the UK, one of the first decisions you'll need to make is whether to purchase the property in your personal name or through a limited company. Each route has its own financial, legal, and tax implications, and what’s right for one investor might not be ideal for another.

In this post, we break down the pros and cons of both options so you can make an informed decision based on your property strategy.

Buying a BTL Property in Your Personal Name

✅ Pros

1. Simpler and Faster Process

Getting a mortgage in your own name is usually quicker and involves less paperwork than setting up a company structure.

2. Lower Mortgage Interest Rates

Lenders typically offer lower interest rates for individual BTL borrowers than for limited companies.

3. Easier Access to Products

There’s a wider choice of lenders and mortgage products available to personal BTL investors.

❌ Cons

1. Higher Income Tax on Profits

Rental income is added to your personal income and taxed at your income tax rate (20%, 40%, or 45%).

2. Limited Mortgage Interest Relief

You can no longer deduct 100% of mortgage interest from your rental income. You now receive a basic-rate tax credit instead, which can increase your overall tax bill.

3. Inheritance Tax Exposure

Owning the property personally can make it harder to plan efficiently for inheritance.

Buying a BTL Through a Limited Company

✅ Pros

1. Corporation Tax Benefits

Rental profits in a limited company are taxed at the corporation tax rate (currently 25% or potentially lower for smaller businesses), which is often less than higher-rate income tax.

2. Full Mortgage Interest Relief

Unlike personal ownership, limited companies can fully deduct mortgage interest from rental income before calculating tax.

3. Potential for Long-Term Tax Efficiency

You can retain profits in the company, reinvest in more properties, and control when (or if) you take income, offering greater tax planning flexibility.

4. Inheritance Planning Options

Company shares can be gifted or passed on more flexibly than individually held properties.

❌ Cons

1. Higher Mortgage Rates and Fees

Limited company mortgage rates are often higher, and lenders may charge higher arrangement fees or require personal guarantees.

2. Fewer Lender Choices

Fewer lenders operate in the limited company BTL space, although this is improving.

3. Additional Costs and Admin

You’ll need to file annual accounts, possibly pay accountants, and manage director responsibilities with Companies House.

4. Capital Gains Tax on Transfer

If transferring personally owned property to a company, you may trigger Capital Gains Tax and Stamp Duty costs.

Which One Is Right for You?

There’s no one-size-fits-all answer — it depends on your:

• Tax bracket

• Long-term investment goals

• Income strategy (e.g., draw income vs retain profits)

• Portfolio size or plans to scale

• Exit strategy or inheritance planning needs

  
  

If you're buying a single property for supplemental income and are a basic-rate taxpayer, a personal name mortgage might be more cost-effective. But if you're building a portfolio, plan to reinvest profits, or are a higher-rate taxpayer, a limited company could offer more long-term benefits, despite the initial complexity.

Example: Limited Company vs Personal in Oxford

Let’s say you’re buying a student let in Oxford with a rental income of £2,000/month and £1,200/month in mortgage interest:

• Personal Name (40% taxpayer)

  Rental profit taxed after basic-rate deduction = approx. £4,320 tax per year

• Limited Company (25% Corporation Tax)

  Full interest deductible, tax on profit = approx. £2,400 tax per year

This could mean over £1,900 in savings annually, before factoring in accounting costs or higher mortgage rates.

How Drummonds Finance Group Can Help

Whether you're considering setting up a limited company for your buy-to-let portfolio or purchasing in your personal name, we can help you:

• Understand your tax position (alongside your accountant)

• Compare BTL mortgage options

• Access limited company mortgage lenders

• Navigate the application and setup process

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📞 Contact us today for tailored mortgage advice across Oxford and the UK.

⚠️ Disclaimer

Tax treatment depends on your individual circumstances and may be subject to change. We always recommend speaking to a qualified tax advisor alongside your mortgage broker.

Your home may be repossessed if you do not keep up repayments on your mortgage.