Setting Up a Property Company: Step by Step

You set up a property company to ringfence risk and blunt Section 24 over the next 10-20 years, not to magic away tax on a portfolio you already own in your own name.

"This guide provides general information about UK landlord tax obligations. It is not financial or legal advice. Tax treatment depends on your individual circumstances and may change. Consider consulting a qualified accountant or solicitor for advice specific to your situation."

1. When a property company actually makes sense

For most people, a company is the right home for new BTL purchases if:

• You are a higher- or additional-rate taxpayer in 2025-26 and expect to stay there. Company structure lets you deduct all mortgage interest before Corporation Tax and then control how and when you extract profits.
• You are planning to build a portfolio, not dabble with a single low-geared flat. The admin overhead makes more sense from 3-4 properties upwards.
• You are comfortable leaving cash in the company to reinvest, not needing every penny for living costs.

When it often does not make sense:

• You are a basic-rate taxpayer with one low-LTV BTL. The Section 24 hit is mild and the cost and faff of a company can outweigh the benefit.
• You are thinking of transferring an existing personally owned portfolio mainly to chase tax savings. The CGT and 5% SDLT surcharge on market value from 2026, plus refinancing costs, often kill the numbers.

Guardrail: in 2025-26, you usually set the company up for new purchases and leave existing stock where it is unless an accountant can show you, in writing, that the CGT and SDLT hit pays back within a timescale you are happy with.

2. Step-by-step: forming your property company

You form a bog-standard private limited company at Companies House and configure it as a property SPV (special purpose vehicle).

Step 1: Choose structure and name

• Structure: Private company limited by shares. That is the default for BTL SPVs.
• Directors: You and, if you want, spouse / partner.
• Shareholders: Often mirror directors, but you can use different share splits for planning (speak to an accountant before getting clever).
• Everything sits under the Companies Act 2006, which governs director duties, filings and accounts.

Step 2: Register at Companies House

You can set up online in under an hour.

• Use the GOV.UK "Register a company" service.
• Provide: registered office (can be your accountant's), SIC code(s), director details, share structure.
• Companies House online incorporation fee is GBP 12-50 depending on service; many formations agents bundle it into a slightly higher fee (2025-26).

Once formed, your company gets:

• A company number.
• A "next accounts due" date.
• A "confirmation statement due" date.

You can see examples of property companies and their obligations on the public register.

Step 3: Pick the right SIC code(s)

You set the nature of business using Standard Industrial Classification (SIC) codes.

For property in 2026, the usual suspects:

• 68100 -- Buying and selling of own real estate.
• 68201 -- Renting and operating of Housing Association real estate.
• 68209 -- Other letting and operating of own or leased real estate.

In practice:

• For a simple BTL SPV, accountants and lenders often steer you to 68209 as the main code.
• 68100 tends to signal "trader / developer". Some BTL lenders do not like it as the primary code because they see it as higher risk.
• Lenders such as The Mortgage Works will normally accept an SPV with codes including 68100, 68201, 68209, 68320, but they still prefer a clean letting SPV rather than a busy trading company.

Rule of thumb: if your plan is "buy and hold rentals", make 68209 your core code and add others only if your accountant or lender is happy with them.

3. Banking and mortgages: how SPV BTL actually works

Business bank account

You need a separate business bank account in the company name.

• High street and challenger banks offer free or low-fee accounts for small companies.
• Expect either GBP 0-10/month or a per-transaction charging model in 2025-26.
• Open the account before you complete on the first purchase so rent and expenses never mix with your personal current account.

Limited company BTL mortgages

SPV BTL is now mainstream. The trade-off is:

• Slightly higher rates and fees than personal BTL.
• More tax flexibility if you are above basic rate.

2025-26 market patterns:

• Many large BTL lenders (TMW, Precise, BM Solutions, Paragon, etc) lend to SPVs that only carry acceptable SIC codes and whose directors give personal guarantees.
• They want an SPV whose only business is property letting, not your consultancy, eBay business and other ventures rolled into one.

Criteria are usually similar to personal BTL:

• 25% deposit (75% LTV).
• ICR tests (often 125% at 5-5.5% for companies, since Corporation Tax is lower than top-rate income tax).

Rates and fees move constantly, but you should assume:

• Company BTL rate premium of 0.25-0.75 percentage points over the sharpest personal BTL deals in 2025-26.
• Arrangement fees often 1-2% of the loan. A GBP 300,000 loan can easily mean GBP 3,000-6,000 in fees.

Most lenders want:

• All directors and significant shareholders as personal guarantors.
• No trading activity in the SPV outside property (no cafe, no Uber side hustle).

4. Director duties, filings and record-keeping

Once the company exists, you take on formal duties under the Companies Act 2006.

Key director responsibilities

You must:

• Act in the company's best interests, not your personal short-term interest.
• Keep proper company records (board decisions, shareholder decisions, PSC register).
• Keep accounting records that show all money in and out and allow accounts and tax returns to be prepared.

The penalties for serious breaches can include fines and disqualification. In practice, if you hire a competent accountant and do not use the company as your personal wallet, you will stay out of trouble.

Annual filings (minimum)

Confirmation statement (CS01)

• Filed at least once a year to confirm officers, shareholdings, SIC codes, registered office.
• Online filing fee GBP 13 per year in 2025-26.

Annual accounts

• Even a micro-entity with one BTL must file accounts.
• Filing deadlines are usually 9 months after year-end.
• You can file micro-entity or small company accounts if you meet the size thresholds.

Corporation Tax return (CT600)

• Filed with HMRC, normally 12 months after year-end, with tax due 9 months and 1 day after year-end.
• Covers rental profit, allowable expenses, finance costs, and any other company income.

Record-keeping:

• Keep invoices, bank statements, tenancy agreements, management statements, and all expense evidence for at least 6 years.
• Separate personal and company spending. If you pay company costs personally, record them as a director's loan or expense reimbursement, not a mystery credit.

5. Real annual running costs in 2025-26

You do not just pay Corporation Tax. You pay for the admin.

Indicative annual costs for a small BTL SPV:

Accountancy

• Year-end accounts + CT600 + basic advice: GBP 500-1,500/year depending on complexity and number of properties (2025-26).

Companies House confirmation statement

• Online filing fee: GBP 13/year.

Registered office / service address (if using an agent)

• GBP 100-300/year if your accountant or company service provider hosts you.

Bookkeeping / software

• DIY spreadsheets: free but risky once you scale.
• Cloud software: GBP 10-40/month if you use it.

Bank charges

• Some providers free, others GBP 5-10/month or transaction-based. Call it GBP 60-120/year.

So even with one property you are likely in the GBP 700-2,000/year range of running costs before tax, depending on how much you outsource.

On a single small BTL with GBP 1,500/year net profit before tax in a company, you could easily hand the entire profit to your accountant and Companies House. That is why company ownership typically only makes sense once you plan multiple properties or high-value stock.

6. Biggest mistakes people make when incorporating

You see the same errors again and again:

Transferring a portfolio for "tax savings" with no CGT / SDLT modelling

• They move personally owned BTLs into a company, triggering CGT on the gain and SDLT (including the 5% surcharge on current market value), plus refinancing fees.
• On even a modest portfolio, this easily runs into tens of thousands of pounds.

Using the same company for everything

• Trading business + property + consultancy in one limited company.
• Lenders then will not treat it as a clean SPV and either decline or tighten terms.

Choosing the wrong SIC codes

• Flagging as 68100 (trader / developer) when the plan is buy-to-let.
• Some lenders then refuse SPV rates or demand higher margins.

Assuming company = no tax

• You pay Corporation Tax in the company and then tax again personally when you draw salary or dividends.
• For small profits, combined company + personal tax can be worse than just paying income tax in your own name, especially if you are basic-rate.

Not understanding director duties

• Treating the company bank account as an extension of your personal wallet.
• Sloppy record-keeping that leaves your accountant guessing and HMRC unimpressed.

7. Property118 incorporation schemes and HMRC Spotlight

In recent years, Property118 and similar outfits have pushed heavy incorporation and "hybrid" structures as the answer to Section 24.

HMRC has now fired warning shots:

• HMRC Spotlight 69 targets a scheme where landlords move property portfolios into LLPs and then companies, using liquidation to sidestep CGT and other charges.
• HMRC also flags hybrid property partnership models under earlier spotlights (for example, Spotlight 63), which reallocate profits between individuals and corporate members.

Key points from HMRC and tax commentators:

• Incorporation relief under TCGA 1992 s162 only applies where a genuine property business is transferred as a going concern in exchange for shares.
• HMRC is increasingly challenging whether small, lightly managed portfolios meet the "business" standard needed to defer CGT.
• Budget 2025 documents flagged changes from 6 April 2026, making incorporation relief no longer automatic and requiring explicit claims, increasing the risk of HMRC scrutiny for landlord schemes built on aggressive interpretations.

So while incorporation itself is legitimate, complex marketed schemes that:

• use LLPs or "hybrid" arrangements,
• promise "no CGT, no SDLT, no tax on rent",

are now squarely in HMRC's sights. If a structure sounds too good to be true, assume HMRC has already written a Spotlight about it.

8. What Reddit and forums get wrong about incorporation

Common bad takes:

"Always use a company now, personal ownership is dead."

Reality: for a basic-rate taxpayer with one or two low-geared BTLs, a company can increase total tax and costs because of accountancy, double taxation on extraction, and mortgage premium.

"You can just transfer later if Section 24 hurts."

Reality: by then, gains are larger, SDLT rates higher (including the 5% surcharge), and incorporation relief is under much more scrutiny. The later you leave it, the more painful the move.

"HMRC has approved the Property118 model."

Reality: HMRC does not "approve" schemes. In fact, it has targeted landlord incorporation arrangements through Spotlights, warning that many marketed designs do not work as advertised and will be challenged.

"Put everything through one company and claim all your life as expenses."

Reality: HMRC guidance on property businesses and investment companies is clear: expenses must be wholly and exclusively for the business, and company funds are not your piggy bank.

Your safer route:

• Use a plain SPV company for new purchases if you are higher-rate, plan to scale, and are comfortable with profits staying in the company.
• Model any portfolio transfer with a proper tax adviser, using real numbers for CGT, SDLT and refinancing.
• Steer clear of marketed schemes that rely on aggressive interpretations of incorporation relief or partnership rules.

Legislation tracker, budget coverage, new tools. Free, no spam.

Didn't find what you were looking for?