UK Buy-to-Let Through a Limited Company: What Arab Directors Need to Know Before Buying

The biggest tax change most Arab property investors don't know about is Section 24, the restriction on mortgage interest relief for individual landlords. Before April 2020, personal landlords could deduct mortgage interest costs in full from rental income. Now you get a 20% tax credit instead. If you're a higher-rate taxpayer (40%), that restriction means you pay tax on rental income that your mortgage interest effectively eats up. A limited company is not subject to Section 24, it deducts mortgage interest as a normal business expense before calculating its taxable profit.

The numbers in practice: assume rental income of £24,000/year and mortgage interest of £12,000/year. A higher-rate personal landlord pays 40% tax on £24,000 gross income (£9,600), then claims the 20% credit (£2,400), netting a tax bill of £7,200 on an income surplus of £12,000, a 60% effective tax rate. A UK limited company deducts £12,000 interest as an expense, pays 19% Corporation Tax on the £12,000 net profit (£2,280), and retains £9,720, before any further personal extraction.

Capital gains treatment is different in a company. Personal landlords get a £3,000 annual CGT exempt amount (down from £12,300 in 2022/23), and residential property gains are taxed at 18% (basic rate) or 24% (higher rate). Within a company, all property gains are subject to Corporation Tax at 19–25%, there is no equivalent annual exempt amount. The company structure is generally more efficient for high rental yield properties but less clear-cut when the primary goal is capital appreciation and eventual sale.

Stamp duty is not the same, and for most company buyers it is higher. In England and Northern Ireland a company normally pays the residential higher rates, even on its first qualifying dwelling, where an individual pays them only when buying an additional home. The higher rates add five percentage points to the standard bands, and they apply where the price is £40,000 or more and the interest bought is not subject to a lease with more than 21 years left. A separate flat 17% corporate rate may apply instead of those bands to a dwelling over £500,000, subject to reliefs such as the one for a property rental business. A UK company that is a close company controlled by people who live outside the UK may be treated as non-resident for Stamp Duty Land Tax, and then also pays the 2% non-resident surcharge; HMRC's manual sets out the test at SDLTM09910. Annual Tax on Enveloped Dwellings (ATED) is a separate annual tax, with its own filing obligations and reliefs. Multiple Dwellings Relief generally ceased for transactions completing or substantially performed from 1 June 2024, subject to transitional protection for contracts exchanged on or before 6 March 2024 and not varied after that date. Scotland and Wales have their own taxes and rates.

A UK property holding company has the same core filing obligations as a trading company: annual accounts, Corporation Tax obligations and a confirmation statement. Director identity verification has been mandatory since 18 November 2025; existing directors provide their personal code with the next confirmation statement. Property transfers can have CGT and SDLT consequences, so obtain advice before moving a personally owned property into a company.