Why Hold Your Properties Through a Limited Company?
A limited company pays corporation tax , rather than income tax , on rental profits. This can be significantly more tax efficient for higher and additional rate taxpayers, especially if profits are retained for reinvestment. However, incorporation is not right for everyone, and professional advice is essential before restructuring your property portfolio.
The tax case for a limited company
Limited companies pay corporation tax on rental profits at:
19% on profits up to £50,000
25% on profits above £250,000.
Marginal relief may apply between these thresholds. Further tax is only payable when profits are withdrawn personally by a shareholder.
By comparison, individual landlords pay income tax on rental profits, whether extracted or not, at 20%, 40% and 45% in England, Wales and Northern Ireland and rates between 19% and 48% in Scotland. From 6th April 2027, separate higher rates for property income are due to apply for England, Wales and Northern Ireland:
| Tax band for property income | Before 6th April 2027 | From 6th April 2027 |
|---|---|---|
| Basic | 20% | 22% |
| Higher | 40% | 42% |
| Additional | 45% | 47% |
The Scottish Government has not yet announced whether it will increase income tax rates on property income in line with the rest of the UK.
Mortgage interest relief is another key difference. Under Section 24 of the Finance (No.2) Act 2015, from 2015 individual landlords could no longer deduct mortgage interest fully from rental income. Instead, they receive a 20% basic rate tax credit only (due to increase to 22% from 6th April 2027 to match property income tax). As this relief is capped at the basic rate, higher and additional rate taxpayers are unable to benefit from the same level of tax efficiency.
Limited companies are not subject to these restrictions and can fully deduct mortgage interest and finance costs before corporation tax is calculated.
With the upcoming income tax rate increase on top of restricted mortgage interest relief, incorporation is becoming an increasingly attractive option for higher and additional rate taxpayers looking to expand their property portfolio.
Many landlords use a Special Purpose Vehicle (SPV) structure, which is a limited company created solely to hold property investments. This creates limited liability, as the company has no other business interests. Many buy-to-let lenders prefer this structure.
You can read more about the sole trader vs limited company decision here.
How you extract money matters
Although a limited company can sometimes pay less tax on retained profits, tax may still arise when you withdraw profits.
Many directors choose to structure their remuneration through a combination of salary, dividends and pension contributions. Note that from 6th April 2026, dividend tax rates have increased for basic rate and higher rate taxpayers to 10.75% and 35.75%. The additional rate remains unchanged at 39.35%.
A company structure is usually most efficient where profits are retained and reinvested back into the business, rather than fully extracted each year.
You can read more about directors’ cash extraction here
The costs and trade-offs of incorporating
Incorporation can trigger tax liabilities if you already own rental properties personally that you plan to transfer to hold in the company.
Capital gains tax
Capital Gains Tax (CGT) may be payable on the market value of the property transferred to a limited company. This is charged on 18% or 24%, depending on your tax band, with a £3,000 annual exemption.
Incorporation relief
Incorporation relief may be available if:
- you run a property rental business as a sole trader,
- you transfer the property to a company in return for shares.
This temporary CGT relief allows you to defer the capital gain until you sell the shares. If you receive cash and shares for the property, you must pay CGT on the cash portion.
From 6th April 2026, incorporation relief will not automatically apply and it must be claimed through your self-assessment tax return.
Land taxes
In England and Northern Ireland, Stamp Duty Land Tax (SDLT) may also be payable on the market value of the property, with a 5% surcharge on additional residential properties. Residential properties worth over £500,000 may fall within the 17% flat SDLT rate for companies. In Scotland and Wales, the equivalent land taxes apply (Land and Buildings Transaction Tax and Land Transaction Tax)
There are also additional compliance costs, including drawing up annual accounts and submitting corporation tax returns. Mortgage products for companies can also be more limited and expensive.
If your company owns residential property valued at over £500,000 each, annual charges may be payable, called the Annual Tax on Enveloped Dwellings (ATED).
Who is a limited company property business right for?
A limited company structure may suit:
- higher and additional rate taxpayers
- landlords with several properties
- landlords planning to reinvest profits for expansion
It may be less beneficial for:
- basic rate taxpayers
- landlords with only a couple of properties
- individuals needing to withdraw all rental profits personally each year
Every landlord’s position is different, so professional advice is essential before making changes to your property business structure.
How can TaxAssist Accountants help?
Holding property through a limited company can provide tax efficiencies. This is particularly true for landlords paying higher rates of tax, or reinvesting profits. However, incorporation also brings additional tax, compliance and financing considerations.
To discuss the most tax-efficient structure for your property portfolio, call TaxAssist Accountants on 0800 0523 555 or use our online contact form here.
Last updated: 4th June 2026