SPV vs Personal Ownership Calculator
Since being fully phased in by April 2020, Section 24 of the Finance Act has removed the ability for individual landlords to deduct mortgage interest as an expense before calculating taxable rental profit. Instead, individual landlords pay Income Tax on their full rental profit — rental income minus allowable expenses, but excluding mortgage interest — and then receive a flat 20% basic-rate tax credit on their mortgage interest, applied after the tax calculation regardless of whether they're a basic, higher, or additional-rate taxpayer.
This matters most for higher and additional-rate taxpayers: a 40% or 45% taxpayer effectively only gets relief on mortgage interest at 20%, not their marginal rate, which can push some landlords into paying tax on money that isn't actually profit in any real sense — it went straight to the mortgage lender as interest. In extreme cases, particularly with high loan-to-value mortgages, Section 24 can push a landlord's effective tax rate on true cash profit well above 100%, or even into a loss-making position after tax, despite the property itself generating a positive cash surplus before tax.
Section 24 applies to individual landlords and partnerships of individuals, but not to limited companies, which is the single biggest reason landlords with significant mortgage borrowing have moved toward company ownership over the past several years.
A limited company holding rental property — commonly called an SPV (Special Purpose Vehicle) — is unaffected by Section 24. It can deduct mortgage interest in full as a normal business expense before arriving at taxable profit, exactly as it would deduct any other cost of running the business. The company then pays Corporation Tax on that net profit: 19% on profits up to £50,000, 25% on profits above £250,000, and a tapered marginal relief rate in between that works out at an effective 26.5% on profit within that band.
The catch is what happens if you want that money personally rather than leaving it inside the company. Extracting profit as a dividend triggers a second layer of tax: in 2026/27, dividend income above the £500 dividend allowance is taxed at 10.75% for basic-rate taxpayers, 35.75% for higher-rate taxpayers, and 39.35% for additional-rate taxpayers, on top of the corporation tax the company already paid. This combined corporation-tax-then-dividend-tax cost can, in some cases, end up close to or even above what an individual landlord would have paid directly — which is why many SPV landlords deliberately leave profit inside the company to reinvest in further properties rather than extracting it every year.
The 5% additional-property Stamp Duty Land Tax surcharge (increased from 3% at the October 2024 Budget) applies broadly to both individual landlords buying a second or subsequent property and to companies buying residential property — a company cannot avoid the surcharge simply by purchasing through corporate ownership. For properties under £500,000, the company pays the same surcharge-plus-standard-rate structure as an individual would.
Above £500,000, however, companies face a flat 15% SDLT rate on the entire purchase price, rather than the tiered surcharge rates individuals pay — which usually makes company purchases of higher-value single properties considerably more expensive on the way in, even though the ongoing income tax treatment favours the company. This is a genuinely important number to run before assuming an SPV is automatically the cheaper route for a higher-value property.
Consider a higher-rate (40%) taxpayer with a rental property generating £18,000 a year in rent, £7,000 a year in mortgage interest, and £2,000 a year in other allowable expenses (letting agent, insurance, minor repairs). Owned personally, taxable profit is £18,000 − £2,000 = £16,000 (mortgage interest excluded under Section 24). Income Tax at 40% on that is £6,400, less a 20% credit on the £7,000 interest (£1,400), giving net tax of £5,000. After paying the mortgage interest and expenses too, cash in pocket is £18,000 − £2,000 − £7,000 − £5,000 = £4,000.
Owned through an SPV, taxable company profit is £18,000 − £2,000 − £7,000 = £9,000, fully deducting the mortgage interest. At 19% small-profits Corporation Tax (well under the £50,000 threshold), tax due is £1,710, leaving £7,290 after-tax profit inside the company — already £3,290 better off than the personal route before any dividend is even considered.
If that £7,290 is extracted as a dividend at the 35.75% higher rate (on £6,790 after the £500 allowance), dividend tax of roughly £2,428 applies, leaving £4,862 in the landlord's pocket — still ahead of the £4,000 personal figure, though by a narrower margin once both layers of tax are included. Leaving the £7,290 inside the company instead of extracting it avoids the dividend tax layer entirely, which is why many landlords with several properties reinvest company profits into further purchases rather than drawing them out each year.
Tax treatment is usually the headline reason landlords consider an SPV, but it isn't the only difference. Mortgage products for limited companies have historically carried slightly higher interest rates and fees than personal buy-to-let mortgages, though the gap has narrowed considerably as more lenders have entered the SPV mortgage market in recent years — it's still worth comparing actual quoted rates rather than assuming the tax saving automatically outweighs a higher borrowing cost.
Running a company also brings ongoing admin: annual accounts, a confirmation statement, and (usually) accountancy fees that an individually-owned property doesn't require — typically a few hundred pounds a year, which should be weighed against the tax saving calculated above rather than ignored. And transferring a property you already own personally into a company is generally treated as a sale at market value for tax purposes, which can trigger Capital Gains Tax and a fresh SDLT charge — meaning the SPV route is usually most straightforward to set up for new purchases, not existing portfolios, without specific professional advice on incorporation relief.