Buy-to-let can still work — but the tax treatment for personally-held property has changed a lot, and structure matters more than ever.
Rental profit added to your other income and taxed at your marginal rate. Mortgage interest only gets a 20% tax credit, not full relief — this is what creates the notorious "80% effective tax rate" trap for a leveraged higher/additional-rate taxpayer.
A company set up specifically to hold property. Rental profit taxed at corporation tax rates, and mortgage interest is a full deductible expense against profit — no 20%-credit restriction. Profits can be retained in the company or drawn as dividends.
A 45%-taxpayer with a highly-leveraged personally-held rental can find that once mortgage interest is added back for tax purposes and only given a 20% credit, their effective tax rate on the actual cash profit can reach roughly 80% in extreme cases — far higher than their headline tax rate suggests.
Jointly-owned property is normally taxed 50/50 between spouses by default. A Form 17 election (with matching beneficial ownership) lets you split rental income in a different proportion, which can shift income to a lower-earning spouse and reduce the household's total tax bill.
Moving existing personally-held property into a company (to access SPV tax treatment) usually triggers Capital Gains Tax and Stamp Duty Land Tax as if you were selling and buying it again — this can be a significant, sometimes prohibitive, upfront cost. It's a decision to model carefully with an accountant before acting, not something to do retrospectively without checking the numbers.
| Route | Effort | Notes |
|---|---|---|
| Your own home | None (already own it) | CGT-free on your main residence |
| REITs (via ISA/GIA) | Very low | Property exposure without being a landlord |
| Single buy-to-let (personal) | Moderate | Watch the mortgage interest restriction |
| SPV portfolio | High | More upfront and ongoing admin, better tax treatment for higher earners |
| HMOs | Very high | Higher yield potential, significantly more hands-on management and regulation |
It can be, but the structure matters far more than it used to. Many higher-earning doctors and dentists now buy new rental property through an SPV limited company specifically to avoid the mortgage interest restriction — modelling both routes before purchasing is worthwhile.
Yes — rental income counts toward the income thresholds that determine when MTD for Income Tax applies to you. See our MTD guide for the current thresholds.