Can my company buy property or invest in shares?

Many business owners wonder whether their limited company can invest in property or buy shares as part of its financial strategy. The short answer is yes, but the decision should be made carefully with a full understanding of the tax, legal, and accounting implications. This article explains how a company can invest in property or shares, what to consider before doing so, and how an accountant can help structure these investments efficiently.

A limited company in the UK can invest surplus funds in a wide range of assets, including property, stocks, and bonds. There is no restriction in company law that prevents this, as long as the company’s articles of association allow investment activity and the directors act in the company’s best interests.

However, the financial and tax treatment of such investments depends on whether they are made as part of the company’s main trade or as a separate activity.

Buying property through a limited company

A company can buy both residential and commercial property. Many directors choose to invest through their company rather than personally because it can provide tax benefits and protect personal assets.

Commercial property

Commercial property investment is common for trading businesses that want to own their premises rather than rent. The company can buy the property outright or through a mortgage and then occupy it for its own use.

If the property is partly used by the business and partly rented out, the company must apportion expenses and income accordingly. Rental income from tenants is taxable under Corporation Tax.

Residential property

A limited company can also buy residential property for investment purposes, such as buy-to-let. The main advantage is that mortgage interest is fully deductible as a company expense, unlike for individual landlords who face restrictions on interest relief.

However, companies pay Corporation Tax on rental profits and Capital Gains Tax (CGT) on property sales at the Corporation Tax rate, not the individual CGT rate. There are also additional costs such as:

  • Stamp Duty Land Tax (SDLT) at higher rates for additional properties.

  • Possible Annual Tax on Enveloped Dwellings (ATED) for high-value properties.

  • Mortgage availability and rates, which are often less favourable for companies than individuals.

If directors plan to use the property personally, there may be additional tax charges for benefits in kind.

Advantages of buying property through a company

  • Mortgage interest and other expenses are fully deductible.

  • Profits are taxed at the Corporation Tax rate, which can be lower than higher-rate Income Tax.

  • Ownership is flexible and can be transferred through company shares.

  • Provides asset protection and succession planning benefits.

Disadvantages

  • Extraction of profits can be costly if directors wish to withdraw funds as dividends.

  • Higher Stamp Duty rates for residential properties.

  • Additional reporting and compliance requirements.

  • Potential double taxation when profits are withdrawn from the company.

Investing in shares through a company

A company can also invest in shares, funds, or other financial instruments using surplus cash. This is often done by companies with stable cash flow that want to earn a better return than traditional savings accounts.

How it works

The company can open a business investment account with a bank or brokerage platform in the company’s name. It can then buy listed shares, bonds, or units in collective investment funds.

The company owns the investments, not the directors or shareholders personally. Any profits or dividends from those investments belong to the company and are subject to Corporation Tax.

Tax treatment of share investments

  • Dividends received: Dividends from most UK companies are usually exempt from Corporation Tax if certain conditions are met.

  • Capital gains: Profits from selling shares are subject to Corporation Tax.

  • Losses: Capital losses from share sales can offset future capital gains.

Accountants must record these transactions accurately in the company’s financial statements and ensure tax is calculated correctly.

Strategic reasons for investing in shares

  • To earn a return on surplus cash rather than leaving it idle.

  • To diversify company assets beyond trading income.

  • To build long term financial reserves or pension contributions.

However, directors should be cautious not to let investment activity dominate the company’s operations unless it is specifically set up as an investment business.

When investing becomes a separate business activity

If your company regularly buys and sells property or shares, HMRC may classify it as an investment company rather than a trading company. This distinction affects tax reliefs and business rates.

Trading companies benefit from reliefs such as Business Asset Disposal Relief (BADR) or Business Property Relief (BPR) for Inheritance Tax purposes, but investment companies generally do not.

For this reason, some business owners set up a separate company (known as a Special Purpose Vehicle or SPV**)** for property or share investments to keep trading and investment activities distinct.

An accountant can advise whether an SPV is appropriate for your circumstances and ensure that the structure remains tax efficient.

Funding company investments

Companies can fund property or share investments using retained profits, bank loans, or director loans. If directors lend money to the company to buy assets, they can later withdraw repayments tax free, as long as the loan is correctly documented.

If the company borrows from a bank, it must ensure it can service the loan from profits or investment returns. Mortgage interest and financing costs are normally deductible when the investment is part of the company’s business activity.

Example in practice

A design agency with £150,000 in retained profits decides to buy a small commercial unit for £120,000 and invest £30,000 in a managed fund. The company rents out part of the property to another tenant and earns dividend income from the investment fund.

Its accountant ensures that rental income and investment gains are recorded separately, calculates Corporation Tax, and advises the directors on extracting profits tax efficiently. By investing through the company, the agency creates an additional income stream and grows its assets while staying compliant.

How accountants support company investments

Accountants play an essential role when a company invests in property or shares by:

  • Assessing the tax implications of different investment options.

  • Advising on ownership structures, such as SPVs.

  • Preparing financial forecasts and cash flow analysis.

  • Managing accounting entries for investment income and gains.

  • Ensuring compliance with HMRC and Companies House requirements.

  • Planning how profits can be reinvested or distributed tax efficiently.

They also ensure investments align with the company’s objectives and risk profile, helping directors make informed decisions.

Conclusion

A company can legally buy property or invest in shares, provided it acts within its articles of association and maintains proper accounting records. These investments can help build long term wealth and make better use of surplus cash, but they must be structured carefully to remain tax efficient and compliant.

With the support of an accountant, directors can understand the financial implications, manage risks, and ensure that every investment benefits the company and its shareholders in the most effective way.