Taxing matters: why Ltd status is finding favour

We’re on the cusp of perhaps the most important Budget of the decade and many landlords will be questioning where the Chancellor’s address will leave lettings, especially on the matter of income tax. This tax is applied to profits made by landlords who privately own their buy-to-lets.

While income tax is devolved in Scotland and Wales, there are concerns that income tax in England could be the golden goose when it comes to an estimated £22 billion hole in the Government’s finances. It’s a pertinent point as the Welsh Government is currently aligning its income tax rates with England. 

Income tax as of today

Personal income tax generates millions for the Government annually. As of 13th November 2025, income tax in England is as follows:

• Income less than £12,570 – tax free

• Basic rate tax band, applied to the portion of income between £12,571 to £50,270 - 20%

• Higher rate tax band, applied to the portion of income between £50,271 to £125,140 – 40%

• Additional rate tax band, applied to the portion of income above £125,140 – 45%

While its election manifesto promised no tax increases, that promise looks set to unravel. Or Labour could be cunning. Freezing the income tax threshold is what is known as a stealth tax or a ‘fiscal drag’. Keeping the tax applied and the income amounts the same, instead of raising thresholds in line with inflation, is a punishing move. 

Although the public may automatically think no increase is good, stagnating thresholds actually mean more people will be pushed into paying higher or additional rate tax via wage growth and/or income earned from assets.

Personal income thresholds can and do change. In April 2023, the 45% additional rate was lowered from £150,000 to £125,140, resulting in more people paying the highest rate of income tax. The previous Government also pledged to freeze England’s personal allowance and higher rate thresholds until 2028 – a date the Chancellor could extend.

What has income tax got to do with young landlords and Ltd companies? Landlords of all ages have slowly been transferring over from personal buy-to-let ownership to purchasing property investments as a limited company. 

Ltd company, less tax?

The main advantage is a preferential tax system. Instead of income tax, limited companies pay corporation tax on profits. At present, corporation tax is 19% for small profits rate (companies with profits under £50,000) and 25% for main rate (companies with profits over £250,000). This is lower than income tax for higher and additional rate tax payers. It’s also worth noting that corporation tax is a UK directive, covering England, Wales and Scotland, so it could be beneficial if income tax is changed in different countries.

Young landlords, wise heads

One group that is keen to switch from personal to limited company ownership is Millennials. Analysis of Companies House data found people born between 1981 and 1996 comprised 50% of all new shareholders in buy-to-let limited companies created so far in England and Wales. This was double the number registered in 2020. To put this into context, Millennials are on track to register 33,395 buy-to-let companies in 2025.

Gen X (born between 1965 and 1980 ) account for 33% of new buy-to-let shareholders this year, followed by Gen Z (born between 1997 and 2012) at 10%. We expect the number of landlords purchasing investments through limited companies to increase, especially if the Budget contains unfavourable income tax changes.

We strongly recommend you talk to a tax specialist or financial adviser if you’re thinking of switching from personal buy-to-let ownership to a limited company. Our team is here to advise you on rent strategies and future buy-to-let purchases.