This article is for overseas landlords who own a UK rental home in their own name and are considering a UK limited company, and for buyers who plan to let a UK property and have not yet decided how to hold it.
The average UK five-year fixed mortgage rate reached 6.00% in early October and stayed around 6% for the rest of the month. Higher rates make interest a larger share of rent, and that sharpens the tax difference between owning personally and owning through a company. Many landlords are now asking whether they should move their property into a company.
We asked Stephen Ho, a UK Chartered Accountant at Apex Consultancy, to explain the tax and financing trade-offs.
Key points
- Who should read this: overseas landlords who own UK residential lets in their own name with a mortgage, and buyers comparing personal and company ownership.
- Where rates stand: according to Moneyfacts, the average five-year fixed rate rose to 6.00% on 5 October and was still around 6% in the week to 30 October. The Bank of England announces its next decision on 5 November.
- Personal ownership: mortgage interest cannot be deducted from rent; it only gives a tax reduction at the basic rate. The higher the rate, the more this restriction bites.
- Company ownership: interest can be treated as an expense, but the advantage is strongest when profits stay in the company. Landlords who draw out all their rent each year lose much of it to dividend tax and administration costs.
- Existing personal owners: a transfer into a company is treated for tax purposes as a sale at market value, so Capital Gains Tax, Stamp Duty Land Tax and refinancing all need to be costed first. Stephen Ho warns that for owners who locked in a low rate, refinancing may cost more than the tax.
1. What do rates near 6% mean for rental property?
UK mortgage rates remain at a three-year high. Moneyfacts reported that on 5 October 2026 the average five-year fixed residential mortgage rate reached 6.00%, the highest since September 2023, and that the number of fixed deals priced below 5% (excluding Northern Ireland-only products) had fallen from 1,494 at the start of September to nine. The five-year average was 5.99% on 15 October, and Mortgage Strategy, citing Moneyfacts, reported it was still 6% in the week to 30 October, with the two-year average at 5.97%.
| Date | Average 5-year fix | Average 2-year fix |
|---|---|---|
| 15 September 2026 | 5.78% | 5.73% |
| 5 October 2026 | 6.00% | 5.98% |
| 15 October 2026 | 5.99% | 5.96% |
| Week to 30 October 2026 | 6% | 5.97% |
Table: Moneyfacts data (figures for 15 and 30 October as reported by The Intermediary and Mortgage Strategy)
The Bank of England held Bank Rate at 3.75% on 17 September 2026 and announces its next decision on 5 November. A Moneyfacts analyst said on 30 October that the market was “taking stock ahead of a likely base rate rise next week”.
For landlords with a mortgage, refinancing when a fixed rate ends will mean interest costs well above the rates many locked in a few years ago. The larger the share of rent that goes on interest, the bigger the after-tax gap between ownership structures. Stephen Ho puts it simply:
“When interest rates rise, the gap between personal and company ownership widens.”
2. Owning personally: interest is not deductible
Individual landlords only get a tax reduction for mortgage interest. HMRC guidance explains that individuals letting residential property cannot deduct mortgage interest and other finance costs from rental income; instead they receive a tax reduction calculated at the basic rate of 20%. The restriction applies to residential lettings held by individuals, not by companies.
Stephen Ho explains why this matters more when rates are high: “If you hold a residential let in your own name, mortgage interest cannot be deducted directly from the rent; it can only be converted into a tax credit at the basic rate (currently 20%). The higher the rate, the larger the share of rent taken by interest, and the more often landlords find themselves ‘not actually making money, but still paying tax’.” (translated from Chinese)
The calculation changes again from April 2027. Under a UK government policy paper, from 6 April 2027 property income in England, Wales and Northern Ireland will have its own rates (22% basic, 42% higher and 47% additional), and the tax reduction for finance costs will be given at 22%. Scotland and Wales set some rates separately, so landlords should check the rates that apply where they are taxed.
3. Owning through a company: what you do with the profit decides the advantage
A company can treat interest as an expense and then pays Corporation Tax. UK Corporation Tax is charged at 19% to 25%, depending on profits. For lets with large interest bills, this is the most often cited benefit of company ownership.
The advantage is not automatic. Company mortgages differ from personal ones in products, rates and terms, so check with a lender or mortgage broker before applying. Profits taken out as dividends are taxed again for UK residents (from April 2026 the basic and higher dividend rates are 10.75% and 35.75%), and shareholders living outside the UK also need to check the tax rules where they live.
Stephen Ho says the key question is how the rent will be used: “If profits are kept in the company and reinvested, the advantage of a company structure is clearest; if all the rent has to be taken out every year, much of that advantage is offset by dividend tax and by accounting, filing and other administrative costs.” (translated from Chinese)
| Item | Personal ownership | Company ownership |
|---|---|---|
| Mortgage interest | Not deductible; basic-rate tax reduction (22% from April 2027) | Can be treated as an expense |
| Tax on rental profit | Income Tax | Corporation Tax at 19% to 25% |
| Taking money out | No further tax | Dividend tax for UK residents |
| Mortgage | Personal mortgage | Company mortgage; check products and terms with lenders |
Table: tax rates from HMRC and UK government guidance; mortgage terms depend on the lender
4. Already own personally? What to cost before moving into a company
Transferring a property to a company you control is treated as a sale at market value. It is not a simple change of name but a sale to the company, and it can trigger several costs at once:
| Cost | What to check |
|---|---|
| Capital Gains Tax (CGT) | CGT on residential property is charged at 18% or 24%; non-UK residents disposing of UK residential property must report to HMRC within 60 days |
| Incorporation Relief | Whether CGT can be deferred depends on whether the letting amounts to a business; for transfers from 6 April 2026, the relief must be claimed in the return |
| Stamp Duty Land Tax (SDLT) | The company pays SDLT on market value at the higher rates (5% surcharge), plus 2% for non-UK resident buyers; above £500,000, watch the 17% flat rate and annual ATED returns |
| Refinancing | A personal mortgage cannot be moved into a company; the company must borrow again at current rates, and early repayment charges may apply |
Table: tax items from HMRC and UK government guidance; how they apply to a specific case needs professional advice
The last item is the one most easily underestimated. Stephen Ho warns: “A personal mortgage cannot be transferred to a company. You have to borrow again at current rates, and may have to pay an early repayment charge. … For owners who locked in a low rate, this step may cost more than the tax.” (translated from Chinese)
Consider a landlord living in Hong Kong who bought a rental flat in Manchester in his own name in 2022 and locked in a low five-year fixed rate. If he moved it into a company now, the company would have to borrow at around today’s 6%, his low-rate mortgage would have to be repaid early, possibly with a charge, and the transfer would be valued at market price for CGT and SDLT. For landlords in this position, comparing these one-off costs with the tax that might be saved each year gives a better answer than comparing tax rates alone.
Conclusion
Rates near 6% make the gap between personal and company ownership more visible, but the benefits of a company mainly go to landlords who can leave profits in the company and reinvest them. Owners who already hold in their own name, especially those on a low fixed rate, should cost CGT, SDLT and refinancing together before moving into a company, rather than looking at tax rates alone.
If you are comparing ownership structures for a UK rental, or your fixed rate is ending soon, tell Zagdim about your situation and we can arrange a suitable specialist for you.
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Glossary
- Special purpose vehicle (SPV): a UK company set up to hold property, common for buy-to-let investors.
- Tax reduction: an amount taken off the tax bill itself, rather than deducted from income.
- Incorporation Relief: a relief that defers Capital Gains Tax when a business as a whole is transferred to a company.
- Stamp Duty Land Tax (SDLT): the tax paid on property purchases in England and Northern Ireland.
- Annual Tax on Enveloped Dwellings (ATED): an annual tax and return for high-value homes held by companies and similar entities.
About this article
Information in this article was checked on 3 November 2026. Mortgage rates are Moneyfacts data; the Moneyfacts website could not be reached directly this time, so the figures for 15 and 30 October are taken from The Intermediary and Mortgage Strategy reports citing Moneyfacts. Bank Rate is from the Bank of England website. Tax rates and rules are from HMRC and UK government guidance and reflect the position in England and Northern Ireland; some taxes differ in Scotland and Wales. The example in Section 4 is simplified and does not calculate specific amounts.
The view that refinancing into a company may cost more than the tax is Stephen Ho’s, based on his practice. Expert views are personal professional opinions. The quotes were confirmed by Stephen Ho in Chinese and translated into English by Zagdim. This article is not individual tax or financial advice; please consult a professional about your own situation.
Experts interviewed
Stephen Ho | UK Chartered Accountant, Apex Consultancy
References
ITV News, “Mortgage misery as average five-year deal hits 6% for first time in three years” (5 October 2026) / The Intermediary, “Average mortgage rate holds at 5.88%: Moneyfacts” (16 October 2026) / Mortgage Strategy, “Average fixed rates stay steady this week, says Moneyfacts” (30 October 2026) / Bank of England, “Interest rates and Bank Rate” / HMRC, “Changes to tax relief for residential landlords: how it’s worked out” / UK government, “Income Tax: changes to tax rates for property, savings and dividend income” / UK government, “Corporation Tax rates and reliefs” / UK government, “Capital Gains Tax: what you pay it on, rates and allowances” / HMRC, “Stamp Duty Land Tax: corporate bodies” / HMRC, Capital Gains Manual CG65735 (Incorporation Relief claims for transfers from 6 April 2026) / Zagdim, “UK Five-Year Mortgage Rate Hits 6% for First Time in Three Years”
