Should I Buy a Rental Property as an Individual or Through a Limited Company?

Buying in Your Own Name

This is the most common route, especially for first-time landlords. You own the property personally, and any rental income goes directly to you. It's simple to set up and manage, and there's generally less paperwork involved.

However, rental income is added to your income, so if you already earn a good salary, your rental profits could push you into a higher tax bracket. On top of that, you only get limited tax relief on mortgage interest - which used to be more generous in the past.

Buying Through a Limited Company

Setting up a company to buy property is becoming more popular - especially with people building a portfolio. The company owns the property, and you act as the director. Rental profits are taxed separately from your income, usually at a lower rate.

You can also deduct mortgage interest in full as a business expense, which makes the numbers more attractive - especially for higher-rate taxpayers. However, there's more admin, extra costs (like accountant fees), and higher interest rates on company mortgages sometimes.

Key Tax Differences

• Individuals: Rental profits taxed at your income tax rate (20%, 40%, or 45%)
• Companies: Profits taxed at the corporation tax rate (currently 25% for most)
• Mortgage interest: Partially deductible as an individual; fully deductible for a company
• Taking money out: As a company director, you may pay extra tax on dividends or salary

What About Mortgages?

Buy-to-let mortgages for individuals are more common and often come with better interest rates. Company buy-to-let mortgages exist but can be more limited, with slightly tougher requirements and higher interest rates. Still, they're becoming more flexible as more landlords go this route.

Costs, Admin and Long-Term Planning

Running a company means extra responsibilities: filing accounts, corporation tax returns, and keeping good records. You'll likely need an accountant, which adds to your ongoing costs - but for many investors, the tax savings and structure outweigh the admin.

It's also worth thinking long-term. Suppose you plan to build a portfolio or pass properties on to your children. In that case, a company structure can offer some estate planning benefits.

When Might It Make Sense to Buy Personally?

• You're buying one or two rental properties
• You're a basic-rate taxpayer
• You want a simple setup with fewer admin costs
• You need the rental income to help with everyday living

When Might a Limited Company Be Better?

• You're a higher-rate taxpayer
• You're building a larger property portfolio
• You want to reinvest profits or leave property to family
• You don't need to draw all the income personally right away

Important: Speak to an Accountant First

This isn't a one-size-fits-all decision. You should always speak to a qualified accountant or tax adviser before choosing. What works best will depend on your income, tax bracket, and long-term plans.

How Farrell Heyworth Can Help

Whether you're buying your first rental or planning to grow your portfolio, Farrell Heyworth can help you:

• Find strong buy-to-let opportunities
• Understand local rental demand and yields
• Get connected with trusted mortgage and tax professionals
• Let and manage your properties through our dedicated lettings team

We're here to ensure you buy confidently and get the best results from your investment. Need tailored property advice? Contact Farrell Heyworth today; we'll gladly help you explore your options.