Operating your holiday let through a limited company can offer tax advantages, but it is not right for everyone. Here is how to think through the decision carefully.
Since the mortgage interest tax relief restriction hit residential landlords and the Furnished Holiday Let regime was abolished in 2025, a growing number of holiday let owners have been asking whether a limited company structure offers a more tax-efficient way to hold and operate their properties.
The answer — as with most tax questions — is: it depends. For some owners the numbers stack up convincingly. For others, the costs, complications, and loss of personal ownership outweigh any tax saving. This guide walks you through both sides of the argument so you can make an informed decision.
Disclaimer: This article is for informational purposes only and does not constitute professional financial, legal, or tax advice. Consult a qualified professional for your specific circumstances.
A limited company is a separate legal entity to its owners (shareholders). When a property is held by a limited company, the company is the legal owner, not the individual. The company pays corporation tax on its profits, and the individuals draw money from the company either as salary (subject to income tax and National Insurance) or as dividends (subject to dividend tax).
This contrasts with personal ownership, where the individual pays income tax directly on rental profits at their marginal rate (up to 45% for additional rate taxpayers).
A Special Purpose Vehicle (SPV) is a limited company set up specifically to hold property — typically used by property investors to ring-fence liability and separate property assets from other business activities.
The most commonly cited argument for company ownership is the difference between the corporation tax rate and the personal income tax rate.
For the 2025/26 tax year:
Compare this to personal income tax:
For a higher or additional rate taxpayer generating substantial holiday let profits, keeping those profits inside a company and paying 19%–25% corporation tax (rather than 40%–45% income tax) can produce a significant annual tax saving — if they do not need to extract the money personally.
A limited company can deduct mortgage interest as a full business expense when calculating taxable profits. The Section 24 restriction that limits individual landlords to a 20% tax credit does not apply to companies.
For leveraged portfolios — those with significant mortgage debt — this is often the single biggest financial argument for company ownership.
If you are reinvesting holiday let income into growing your portfolio rather than drawing it for personal living expenses, keeping profits inside a company and paying only corporation tax before reinvestment can accelerate growth substantially. The company becomes a tax-efficient vehicle for compounding.
If you already own properties personally and wish to transfer them to a company, HMRC treats this as a sale at market value. This means:
For properties that have appreciated significantly, the combined SDLT and CGT cost of incorporating an existing portfolio can easily run into tens or hundreds of thousands of pounds — often making incorporation financially unviable for existing owners.
Limited companies face a materially different mortgage market to individuals:
The cost difference in mortgage rates can offset or eliminate the tax saving from company ownership, depending on the size of the mortgage.
Profit inside a company is not freely available to you as an individual. Every time you extract money from the company — whether as salary or as dividends — it is a taxable event.
Dividend tax rates for 2025/26:
Added to the corporation tax already paid on the profits, the effective combined tax rate on profits extracted as dividends can be substantial. For a higher rate taxpayer:
If you need to live on your holiday let income, company ownership is often less tax-efficient than personal ownership, not more.
Running a limited company brings statutory obligations:
Accountancy fees for a company are typically higher than for personal tax returns — potentially £1,000–£3,000 per year more, depending on the complexity of the business.
When the company sells a property, it pays corporation tax on the gain. When you then liquidate the company (or extract the proceeds), you may pay additional tax on the distribution. The process is more complex and can be more expensive than simply selling a personally owned property.
If you have concluded that a company structure is right for your circumstances, here is how it works:
You incorporate a limited company with Companies House. This can be done online at GOV.UK for a fee of £50 (standard) or £10 (software filing). The process takes less than 24 hours online.
The company must have:
The SIC code for companies holding investment properties is typically 68209 (other letting and operating of own or leased real estate).
For a family property business, consider:
Share structure is worth planning carefully at the outset — changing it later has tax and legal implications.
A limited company structure tends to make financial sense if you:
It is less likely to make sense if you:
Before making any decision, take these steps:
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