As property prices rise and tax rules evolve, many investors are considering owning UK property through a limited company. While this structure can offer several tax advantages, it also introduces compliance obligations and financial complexities. Here’s what you need to know about the tax implications of holding property in a company.
Why Own Property Through a Company?
Purchasing property via a limited company has become increasingly popular, particularly among buy-to-let landlords. The main reasons include:
- Corporation tax rates are generally lower than higher-rate personal income tax.
- Greater ability to retain profits within the company.
- Inheritance tax and estate planning advantages in some cases.
Tax Implications of Company-Owned Property
1. Corporation Tax on Rental Income
Rental profits earned by a company are subject to corporation tax, currently at 25% (as of 2025) for companies with profits over £50,000.
- Companies can deduct all mortgage interest and allowable expenses when calculating profits, unlike individuals who are restricted by Section 24 mortgage interest relief changes.
2. Annual Tax on Enveloped Dwellings (ATED)
If a company owns residential property valued over £500,000, it may be liable for Annual Tax on Enveloped Dwellings (ATED).
- Reliefs are available if the property is rented commercially or used in a property development business, but companies must still file ATED returns annually.
3. Capital Gains Tax (CGT)
When a company sells a property, it pays corporation tax on chargeable gains. The gain is calculated by deducting the original cost, allowable expenses, and indexation relief (if applicable) from the sale price.
- No personal CGT allowances apply to companies.
- Shareholders may also face personal tax if they extract profits via dividends.
4. Dividend Tax for Shareholders
If you withdraw profits from the company, you may pay dividend tax on top of corporation tax. The dividend tax rates for 2025 are:
- 8.75% (basic rate)
- 33.75% (higher rate)
- 39.35% (additional rate)
5. Stamp Duty Land Tax (SDLT)
Company purchases of residential property incur an additional 3% SDLT surcharge and may be subject to higher rates if the Stamp Duty Land Tax (SDLT) changes in 2025 take effect.
6. Inheritance Tax (IHT) Planning
Owning property through a company can offer more flexible options for passing on shares to heirs, though careful structuring is required to maximise IHT efficiency.
Pros and Cons of Using a Company Structure
| Pros | Cons |
|---|---|
| Full mortgage interest relief | Higher administrative and accountancy costs |
| Potential IHT planning benefits | Double taxation (corporation tax + dividend tax) |
| Profits can be retained and reinvested | SDLT surcharge and ATED for high-value homes |
| Better for higher-rate taxpayers | Limited access to personal tax reliefs |
Is Company Ownership Right for You?
The decision to hold property in a company should consider:
- Your income level and tax bracket
- Long-term investment goals
- Plans to retain or withdraw profits
- Property type and value
How Eclat Accountancy Can Help
At Eclat Accountancy, we support landlords and investors with:
- Assessing whether a company structure suits your property portfolio
- Corporation tax and ATED compliance
- Tax-efficient profit extraction and dividend planning
- Strategic advice on property tax and inheritance planning
Final Thoughts Owning UK property through a limited company can bring significant tax benefits, but also demands careful tax planning and compliance. It’s essential to weigh up the pros and cons based on your personal financial situation.
Get in touch with Eclat Accountancy today for tailored property tax advice.
