Why Incorporated BTL Landlords Should Choose Serviced Accommodation Over Traditional Lets

27,200 New BTL Companies in Six Months: Are They Missing a Trick?

The numbers are hard to ignore. In the first half of 2026 alone, 27,200 new buy-to-let limited companies were established in the UK, with corporate structures now accounting for a staggering 75% of all new BTL purchases. London landlords, in particular, have been leading this charge, incorporating to access more favourable corporation tax rates, retain profits efficiently, and build long-term portfolio wealth.

But here's the thing: the vast majority of these newly incorporated landlords are still funnelling their properties into traditional assured shorthold tenancies (ASTs). They've taken the smart step of optimising their tax wrapper, only to fill it with the lowest-yielding strategy available.

If you've gone to the effort of incorporating, it's worth asking: why not deploy that structure into serviced accommodation, where the tax advantages actually compound your returns?

Why Landlords Are Incorporating (And Why It Makes Sense)

Let's start with the basics. Since the phased removal of mortgage interest relief for individual landlords, which concluded in 2020, the financial incentive to hold rental property through a limited company has become overwhelming. Individual landlords now receive only a basic rate tax credit on mortgage interest, while limited companies can deduct the full cost of mortgage interest as a business expense before calculating corporation tax.

Corporation tax currently sits at 25%, compared to the 40% or 45% income tax rates that many London property investors fall into. When you factor in the ability to retain profits within the company, reinvest without triggering personal tax, and eventually extract income through dividends at lower effective rates, the maths is compelling.

So the incorporation trend makes complete sense. The question is what you do with the structure once you have it.

The Problem With Defaulting to Traditional ASTs

Traditional ASTs are familiar, straightforward, and relatively low-maintenance. A tenant moves in, pays rent monthly, and you cover your mortgage with a modest margin. In London, gross yields on long-term lets typically hover between 3% and 5%, and once you account for mortgage payments, management fees, maintenance, void periods, and insurance, net returns can feel underwhelming.

For an incorporated landlord paying corporation tax at 25%, a slim net yield gets slimmer still. You've built an efficient tax structure around an inefficient income strategy.

There's also the regulatory burden to consider. Selective licensing, the Renters Reform Act, and evolving EPC requirements all add cost and complexity to traditional lettings. None of these are deal-breakers, but they chip away at your margins in a market where margins are already tight.

Why Serviced Accommodation Changes the Equation

Serviced accommodation, sometimes called short-term lets or holiday lets, involves furnishing a property to a high standard and letting it on a nightly or weekly basis to guests, typically through platforms like Airbnb, Booking.com, and direct booking channels.

In London, a well-managed serviced accommodation property can generate gross yields of 8% to 15%, sometimes more in high-demand locations. That's two to three times what the same property would achieve on a traditional AST.

But the real magic happens when you combine serviced accommodation with a limited company structure. Here's why:

Capital Allowances

With serviced accommodation, you can claim capital allowances on furniture, fixtures, and equipment. Traditional lets lost access to the old wear and tear allowance years ago, leaving only replacement relief. In a limited company running serviced accommodation, your upfront furnishing costs become genuine tax deductions that reduce your corporation tax bill in year one.

Full Expense Deductions

Cleaning, linen, guest supplies, platform commissions, professional management fees: all of these are fully deductible business expenses. The operating costs are higher than a traditional let, certainly, but they're all working to reduce your taxable profits within the company.

Retained Profit Compounding

Because serviced accommodation generates significantly more gross income, the retained profit within your company grows faster. If you're reinvesting to acquire additional properties, that compounding effect is substantial. A company retaining £15,000 per property annually (after all expenses and tax) builds a war chest far faster than one retaining £4,000.

Business Asset Status

Properties qualifying as furnished holiday lets, or those operated as genuine serviced accommodation businesses, may qualify for Business Asset Disposal Relief (formerly Entrepreneurs' Relief) when sold. This means a potential 10% capital gains tax rate on disposal, rather than the standard rates. The criteria are specific and you'll need professional tax advice, but the opportunity is real.

What Landlords Need to Watch Out For

Serviced accommodation isn't without its challenges, and it's important to go in with your eyes open.

Planning and licensing: In London, the 90-day rule limits short-term lets in residential properties unless you secure planning permission for a change of use. This is a genuine constraint, though there are compliant strategies available, including operating in boroughs with more flexible approaches, targeting properties with existing commercial use, or securing the relevant permissions.

Operational intensity: Unlike a traditional let where you collect rent monthly and handle the occasional maintenance call, serviced accommodation requires guest communication, professional cleaning, linen management, pricing optimisation, listing management, and review handling. It's a hospitality business, not a passive investment.

Furnishing standards: Guests expect hotel-quality furnishings, fast WiFi, smart TVs, quality linens, and a fully equipped kitchen. The initial setup cost is higher, though as we've discussed, those costs are tax-deductible within your company structure.

Seasonality and occupancy: London benefits from year-round demand driven by tourism, business travel, and events, but there will still be fluctuations. A professional pricing strategy that adjusts dynamically is essential to maintaining strong occupancy and average nightly rates.

The Simple Path: Professional Management That Delivers

Here's where many incorporated landlords hesitate. They can see the yield potential, they understand the tax advantages, but the operational complexity feels like a step too far. Running a serviced accommodation business on top of a day job, or across multiple properties, quickly becomes a full-time commitment.

This is exactly where professional short-term let management transforms the equation. Rather than choosing between high returns and a hands-off investment, you get both.

At Airhosts, we manage the entire serviced accommodation operation for London landlords. From professional photography and listing optimisation to dynamic pricing, guest communication, cleaning coordination, and maintenance management, every detail is handled. Your limited company receives the income, claims the deductions, and compounds the returns, while you spend precisely zero hours managing guest check-ins at midnight.

The difference in yield between a professionally managed serviced accommodation property and a traditional AST is not marginal. For many of the London landlords we work with at Airhosts, switching from a long-term let to a professionally managed short-term let has doubled or even tripled their net income from the same property, within the same corporate structure.

Your Limited Company Deserves a Strategy That Matches

You've already made the smart decision to incorporate. You've structured your portfolio for tax efficiency, long-term growth, and professional management of your wealth. Now it's time to make sure the income strategy inside that structure is working just as hard.

Serviced accommodation in London, managed professionally, is the highest-yielding, most tax-efficient use of a BTL limited company. Full stop.

If you're an incorporated landlord in London and you want to see exactly what your property could earn as a serviced accommodation unit, get in touch with Airhosts today. We'll give you a free, no-obligation income projection and show you how simple it is to start earning what your property is actually worth.