Should Your Holiday Let Be in a Limited Company?

10 min read · Updated July 2026 · General information, not tax advice

Since the holiday let tax rules changed in April 2025, one question has come up more than any other: should I put my holiday let in a limited company? Buy-to-let landlords have been asking it for years. Holiday let owners mostly didn't need to, because the old rules gave them the main benefit anyway. Now they don't, and the question has arrived on every mortgaged owner's desk.

The short answer is: sometimes it's a great idea, sometimes it's an expensive mistake, and the difference comes down to five things you can mostly work out from your own numbers.

Why Everyone Is Suddenly Asking

It's about mortgage interest. When you own a holiday let personally, the interest you pay no longer reduces your rental profit, one of the changes that came in with the FHL abolition. Instead HMRC gives you a credit worth 20% of the interest off your final bill. If you pay tax at 40%, that's half the relief you used to get.

A limited company plays by different rules. A company deducts the whole mortgage payment's interest from its profits before tax is worked out, the way individuals used to. On £12,000 a year of interest, a 40% taxpayer gets £2,400 back through the credit. A company saves tax on the full £12,000. That gap, year after year, is what's driving the question.

How a Company Actually Works, in One Paragraph

A limited company is a separate legal thing that you own. The company owns the property, collects the rent, pays the bills, and pays corporation tax on its profits: 19% on profits up to £50,000, rising towards 25% on much bigger profits. The money left after tax belongs to the company, not to you. To get it into your pocket you pay yourself, usually through dividends, and you pay personal tax on those. That two-step structure is the whole game: it's what creates the savings, and it's also what creates the catches.

Factor 1: Your Tax Band

If your total income keeps you in the basic rate band (broadly, under about £50,000 a year), the interest change barely touched you. The 20% credit matches what you would have saved anyway, and a company has little to offer you on this front.

The case builds as your income rises. At 40%, the gap is real money. At 45%, more so. One thing worth checking before you go anywhere near a company: if you own the let jointly with a partner who earns less, moving more of the ownership (and so more of the income) to them can capture some of the same saving with far less upheaval.

Factor 2: The Size of Your Mortgage

The company's advantage scales directly with the interest you pay. No mortgage, no advantage: an owner with a paid-off cottage gains almost nothing here. A heavily borrowed portfolio gains the most.

Two real-world deductions from that saving, though. Lenders charge more for company mortgages on holiday lets, often half a percent or more, and they'll usually ask you to personally guarantee the loan anyway. Price the actual mortgage deal you'd get, not the one you have now, before you count the winnings.

Factor 3: Do You Spend the Profits or Save Them?

This is the factor people miss, and it decides more cases than any other.

If the company keeps its profits and reinvests them (towards the next deposit, the next refurb, paying down the loan), only corporation tax has been paid, at 19% to 25%. Compare that with up to 45% personally, and money compounds noticeably faster inside the box.

But if you live off the income, the picture changes. Every pound you draw out as a dividend gets taxed again in your hands: 8.75% for basic rate taxpayers, 33.75% at higher rate. Stack corporation tax and dividend tax together and a higher rate taxpayer spending everything the company makes can end up roughly where they started, minus the accountancy fees. A company is a good place to leave money and an expensive place to pass it through.

Factor 4: An Existing Property Costs Real Money to Move

Here's the catch that stops most people. If you already own the holiday let personally, you can't just hand it to your company. Legally, you are selling it to the company at today's market value, and that triggers two tax bills at once.

First, capital gains tax: tax on the growth in the property's value since you bought it, at 18% or 24%, payable now, even though no actual money changed hands. Second, stamp duty: the company pays it on the full market value, including the surcharge for additional properties. On a cottage that's doubled in value since you bought it, the combined bill can swallow a decade of interest savings.

There is a relief that can postpone the capital gains bill (it's called incorporation relief) where the letting genuinely runs as a hands-on business rather than a passive investment. Actively managed holiday lets, with their changeovers, guest management and marketing, make a much stronger case than ordinary buy-to-lets. But it's judged on the facts, and this is exactly the point where you want advice, not optimism.

Which is why the cleanest version of the company route is the one that starts at purchase. Buying your next holiday let through a company skips the transfer costs entirely. It's far easier to start in the right structure than to move into it later.

Factor 5: How You Plan to Get Out

Think about the end before you build the beginning. Sell a personally owned holiday let and you pay capital gains tax once, on your gain. Sell a property out of a company and the company pays tax on its gain, then you pay tax again getting the money out. There are ways to manage it (selling the company itself rather than the property, for one), but the structure that saved you tax while you held the property can cost you tax when you leave.

If your plan is to sell up in three or four years, the setup and transfer costs may never earn themselves back. If your plan is to hold for decades and eventually pass the portfolio to your children, company shares are much easier to hand over gradually than bricks, and the company starts to look like an inheritance plan as well as a mortgage fix.

The Boring Downsides Nobody Mentions

• Annual company accounts and filings, meaning accountancy fees of roughly £800 to £1,500 a year more than a personal return
• Your company's accounts are on public record at Companies House, so anyone curious can see them
• Fewer mortgage lenders to choose from, at worse rates
• More admin: a separate bank account, formal records, dividend paperwork

None of these kills the idea on its own. Together they set a floor: the interest saving needs to clear the running costs before the company earns a penny.

So Should You Do It?

The pattern from real cases is fairly consistent. Buying a new property, higher rate taxpayer, decent-sized mortgage, planning to reinvest the profits: the company usually wins, sometimes by a wide margin. Already own the property outright, or spend the income as it comes: it usually loses. In between sits everyone else, and the honest answer for them is a proper side-by-side comparison using their actual mortgage, income and plans, not a blog post. Including this one.