James Property Education Hub
Personal Name vs Limited Company
The Full Tax Comparison (2027 Rates) — A side-by-side breakdown using real rental income examples, covering the new 2027 tax bands, corporation tax, dividend tax, and net profit positions.
One of the most important decisions you will make as a property investor has nothing to do with location, strategy, or yield. It is the question of structure: should you buy in your personal name or through a limited company? This article puts both options side by side using real numbers based on the April 2027 tax rates so you can make an informed decision before you buy your first or next property.
The New Tax Landscape From April 2027
The Autumn 2025 Budget introduced a 2 percentage point increase across property income tax rates. These take effect from April 2027. The updated bands are:
- Tax-free personal allowance: £12,570
- Basic Rate on property income: 22% (£12,570 to £50,270)
- Higher Rate on property income: 42% (£50,270 to £125,140)
- Additional Rate: 47% (above £125,140)
These are the rates that now apply to personal name landlords. Limited companies are not affected. Companies continue to pay Corporation Tax, currently 19% for profits below £50,000 and 25% for profits above £250,000.
The Side-by-Side Comparison
Let's use a consistent example across all three positions so you can see the difference clearly.
Property details:
Property details:
- Monthly rent: £1,000
- Monthly mortgage interest: £500
- Real profit: £500
Option 1: Personal Name — Basic Rate Taxpayer
Under Section 24, you are taxed on gross rent (£1,000), not on your real profit (£500). However, you receive a basic rate tax credit on the mortgage interest.
Tax at 22% on £1,000 = £220
Less: 22% credit on £500 mortgage interest = £110
Tax to pay: £110
Net profit after tax: £390
This is effectively the same as paying 22% on the real profit of £500. Section 24 does not create additional damage for basic rate taxpayers because the credit cancels out the distortion.
Under Section 24, you are taxed on gross rent (£1,000), not on your real profit (£500). However, you receive a basic rate tax credit on the mortgage interest.
Tax at 22% on £1,000 = £220
Less: 22% credit on £500 mortgage interest = £110
Tax to pay: £110
Net profit after tax: £390
This is effectively the same as paying 22% on the real profit of £500. Section 24 does not create additional damage for basic rate taxpayers because the credit cancels out the distortion.
Option 2: Personal Name — Higher Rate Taxpayer
The same property. The same mortgage. But your salary or other income has pushed you into the higher rate band. Your property income now sits in 42% territory.
Tax at 42% on £1,000 = £420
Less: 22% credit on £500 mortgage interest = £110
Tax to pay: £310
Net profit after tax: £190
This is where Section 24 becomes seriously damaging. Your real profit is £500 but you take home £190. The higher rate of tax combined with Section 24 means you lose more than 60% of what you actually earned.
The same property. The same mortgage. But your salary or other income has pushed you into the higher rate band. Your property income now sits in 42% territory.
Tax at 42% on £1,000 = £420
Less: 22% credit on £500 mortgage interest = £110
Tax to pay: £310
Net profit after tax: £190
This is where Section 24 becomes seriously damaging. Your real profit is £500 but you take home £190. The higher rate of tax combined with Section 24 means you lose more than 60% of what you actually earned.
Option 3: Limited Company
The company is not subject to Section 24. It can deduct the full £500 of mortgage interest as a business expense.
Gross rent: £1,000
Less mortgage interest (100% deductible): £500
Taxable profit: £500
Corporation tax at 19%: £95
Net profit retained in company: £405
The company retains more than double the net profit compared to the higher rate personal name position, from the exact same property.
The company is not subject to Section 24. It can deduct the full £500 of mortgage interest as a business expense.
Gross rent: £1,000
Less mortgage interest (100% deductible): £500
Taxable profit: £500
Corporation tax at 19%: £95
Net profit retained in company: £405
The company retains more than double the net profit compared to the higher rate personal name position, from the exact same property.
The Summary Table
Personal Name (Basic Rate): | Net profit £390 / Tax paid £110 |
Personal Name (Higher Rate): | Net profit £190 / Tax paid £310 |
Limited Company: | Net profit £405 / Tax paid £95 |
Based on: £1,000/month rent, £500/month mortgage interest, real profit £500
What About Getting the Money Out of the Company?
A common concern is that the profit belongs to the company, not to you personally. To access it, you would normally pay a dividend, which attracts dividend tax of 8.75% at the basic rate band (10.75% at higher rate from April 2027).
However, there is a smarter way to manage this. If you loaned your own money into the company to fund a purchase — for example, the deposit — that loan goes onto your Director's Loan Account (DLA). The DLA is simply a record of what the company owes you personally.
You can withdraw money from the company by repaying your DLA. That repayment is not treated as income. There is no tax on it. This means that in years where the company has made a profit, you do not have to trigger a taxable dividend event to access cash. You simply recall part of the loan.
By managing your DLA carefully, you can legally defer tax rather than avoid it — and that deferral can continue for as long as you are reinvesting and growing the portfolio.
However, there is a smarter way to manage this. If you loaned your own money into the company to fund a purchase — for example, the deposit — that loan goes onto your Director's Loan Account (DLA). The DLA is simply a record of what the company owes you personally.
You can withdraw money from the company by repaying your DLA. That repayment is not treated as income. There is no tax on it. This means that in years where the company has made a profit, you do not have to trigger a taxable dividend event to access cash. You simply recall part of the loan.
By managing your DLA carefully, you can legally defer tax rather than avoid it — and that deferral can continue for as long as you are reinvesting and growing the portfolio.
The Decision Framework
Based on everything covered in the JPU lessons, here is a straightforward way to think about the decision:
The important thing to understand is that once you are a higher rate taxpayer, the damage from Section 24 is compounding. Every property you add makes the position worse, not better. Getting the structure right before you buy is far cheaper than trying to correct it later.
- Basic rate taxpayer, buying one or two properties, want simplicity: personal name may be acceptable
- Higher rate taxpayer now, or likely to become one as the portfolio grows: limited company is the correct choice
- Planning to scale to five or more properties: limited company from the start, always
- Retiring and dropping to zero employment income: personal name may work again as you utilise your full allowance
The important thing to understand is that once you are a higher rate taxpayer, the damage from Section 24 is compounding. Every property you add makes the position worse, not better. Getting the structure right before you buy is far cheaper than trying to correct it later.
Key Takeaway
At the higher rate, personal name investors keep less than 40p per £1 of real profit.
A limited company retains £405 from the same property that leaves a higher rate taxpayer with £190.
The Director's Loan Account allows you to access your own money tax-free.
Structure is the first decision. Get it right before you buy.
A limited company retains £405 from the same property that leaves a higher rate taxpayer with £190.
The Director's Loan Account allows you to access your own money tax-free.
Structure is the first decision. Get it right before you buy.
