Dear Barry

I'm keen to hear an expert opinion on the tax benefits of setting up a limited company for the purposes of acquiring rental property. I currently own 3 properties (one I live in and the other are houses I rent to tenants). I'm keen to add another buy-to-let to my portfolio but with tax relief on cost of finance being phased out, I'm wondering if I can hold on to some more of my income if I set up a limited company for my rentals? Kind Regards, Louis.
Ask Barry Image

Hi Louis, 

I've lost count of the number of emails I've had on this topic since publishing this article about the changes to tax relief

Beginning with this financial year (2017/18), the government is phasing out tax relief for individual landlords on their cost of finance. For most landlords, this means that in your 2020/21 tax return you'll no longer be able to claim your mortgage interest as a deductible expense.

Limited companies, however, will still be able to offset 100% of the cost of finance for these properties, so many are thinking about transferring their properties into limited companies. If that seems like too simple a solution - well, you'd be right.

Transferring a buy-to-let property from individual ownership to the balance sheet of a limited company means you are effectively selling the property to the company, which means you'll incur capital gains tax.

There is also the likelihood of incurring stamp duty charges and possibly early redemption charges on the mortgage.

Transferring existing properties into a limited company could well be more hassle and expense than it's worth, although if you happen to own the property outright you'll at least avoid the mortgage headaches. 

Setting up a limited company for future buy-to-let property purchases is an option, although it is wise to weigh up your increased profit retention against the cost and hassle of setting the company up.

You will have to prepare more detailed accounts - is this going to increase costs of professional services such as accountancy and legal support?

In short - I can't give you a definitive answer to this particular question, as your decision must be based on the advice of a registered tax or financial advisor.

However, I can advise on the questions to ask yourself, and hopefully some of those I've posed above will help you decide if this is the route for you. Remember also to consult a mortgage advisor on how the market looks for individual buyers compared to what rates are available to limited companies.

If you are a landlord with a burning question or a niggling problem, I would love to help you. Drop me a line to and I'll do my best to find the answers you need - or at least ask you the right questions!