Yes, a limited company can buy a house in the UK. There is no legal restriction preventing a company from purchasing residential property. The company becomes the legal owner, the property is an asset on the company's balance sheet, and any income generated by the property, such as rental income, flows through the company's accounts rather than to an individual.

Whether buying through a limited company is the right approach depends on your tax position, your plans for the property, how you intend to extract value from it, and the specific costs involved in running a company as a property vehicle. This guide explains the key considerations.

---

Why People Buy Houses Through Limited Companies

Tax treatment of mortgage interest

The main driver behind the growth in limited company property ownership in recent years has been changes to mortgage interest relief for individual landlords. Since 2017, individual landlords can no longer deduct mortgage interest from rental income as a business expense when calculating their taxable income. Instead, they receive a basic rate tax credit equal to 20 percent of the mortgage interest paid. For higher and additional rate taxpayers, this significantly increased the tax payable on rental income.

Companies are not subject to this restriction. A company can deduct its full mortgage interest costs as a business expense before calculating its taxable profit, just as it always could. For higher-rate taxpaying landlords with mortgaged properties, this difference in treatment can make company ownership considerably more tax-efficient than personal ownership.

Corporation tax versus income tax

Profits generated within a limited company are subject to corporation tax, which from April 2023 is 19 percent for small companies with profits up to 50,000 pounds and up to 25 percent for larger profits. Income tax on rental income for an individual higher-rate taxpayer is 40 percent. Retaining profits within the company at the corporation tax rate, rather than paying them out to a higher-rate individual, produces a lower immediate tax charge. The retained profits can be reinvested in further property or other assets.

Profit retention and reinvestment

A company can accumulate profits and reinvest them without triggering personal income tax at the point of retention. An individual who receives rental income above the basic rate threshold pays tax on it immediately regardless of whether they need the money for personal use. The corporate structure gives more flexibility over the timing of when profits are drawn and therefore taxed at the personal level.

---

The Disadvantages and Costs

Higher mortgage costs

Mortgages for limited companies buying residential property, known as limited company buy-to-let mortgages, typically charge higher interest rates than equivalent personal buy-to-let mortgages and may have higher arrangement fees. The mortgage market for limited companies is less competitive than the personal market, though it has expanded significantly in recent years. The additional mortgage cost needs to be weighed against the tax saving to assess whether the structure is net beneficial.

Stamp duty land tax

Stamp duty land tax applies to company purchases of residential property at the standard rates plus a three percent surcharge, which is the same additional charge that applies to individuals buying a second or subsequent residential property. There is no first-time buyer relief or equivalent exemption for companies. This makes the initial purchase cost higher than for a first-time individual buyer in England.

Capital gains tax on extraction

When a company sells a property, any gain is subject to corporation tax rather than capital gains tax. This can be more or less advantageous than individual ownership depending on the size of the gain and other factors. When the proceeds are extracted from the company by the shareholders, they may be subject to further tax in the form of dividend tax or capital gains tax. The overall tax picture on exit needs to be modelled carefully.

Extracting value for personal use

If you want to use rental income for personal living expenses, you need to extract it from the company, either as salary, dividends, or director's loan. Each of these has its own tax treatment and associated complexity. The company structure is most efficient when profits can be left within the company rather than being drawn out regularly for personal use.

Administration and compliance

A limited company must file annual accounts with Companies House, submit corporation tax returns to HMRC, and may need to prepare quarterly VAT returns depending on the structure. These administrative requirements add cost, typically in accountancy fees, that does not apply to an individual landlord. For a small portfolio, these costs can offset a significant portion of the tax saving.

---

What Type of Company Is Used?

Most landlords buying through a company use a private limited company incorporated specifically for the purpose of holding property. The company is typically given a Standard Industrial Classification code relating to property activities, which some mortgage lenders require for a limited company buy-to-let mortgage.

Some landlords use an existing trading company to buy property, but this is generally not recommended because it mixes the property assets with the trading risks and may complicate both the tax and commercial position. A clean, separate property holding company is the more common and more straightforward approach.

---

Using a Limited Company for a Main Residence

The considerations above apply primarily to buy-to-let investment property. Using a limited company to buy a property you intend to live in as your main residence is much less common and generally not tax-efficient. Living in a property owned by your company creates benefit in kind complications, as the use of the property by a director or employee for personal purposes is a taxable benefit. The tax treatment of a director living in a company-owned property is unfavourable compared with simply owning it personally.

---

Summary

A limited company can legally buy a house in the UK, and for higher-rate taxpaying landlords with mortgaged investment properties the structure can offer meaningful tax advantages, primarily through the retention of mortgage interest deductibility and the deferral of higher-rate personal tax on retained profits. The advantages need to be weighed against higher mortgage costs, stamp duty, administrative expenses, and the complexity of extracting value for personal use.

The decision is not straightforward and should be made only after taking qualified accountancy advice specific to your situation. For some landlords the structure is clearly beneficial; for others, particularly those buying with cash at basic rate, it adds cost and complexity without meaningful tax benefit.