Can I Own Rental Properties Through a Limited Company

Can you own rental property through a limited company

Yes, you can legally own one or more rental properties through a limited company. The company becomes the legal owner of the property, meaning all rental income and expenses belong to the business rather than you personally.

This structure is often called a limited company buy-to-let or incorporated property investment. Many landlords use this setup to manage tax more efficiently, particularly since mortgage interest relief for individual landlords has been restricted in recent years.

You can either:

• Buy new properties directly through a limited company, or

• Transfer existing personally owned properties into the company (though this can trigger taxes).

How limited company property ownership works

When you purchase a property through a limited company, the company is listed as the legal owner on the title deeds. The company will usually need to take out a commercial buy-to-let mortgage, as standard personal mortgages are not available for company ownership.

All rental income goes into the company’s business bank account, and the company pays its own tax through Corporation Tax.

If you want to take profits personally, you can pay yourself:

• A salary, which is deductible for Corporation Tax purposes but subject to PAYE, or

• Dividends, which are paid from post-tax profits and taxed at your personal dividend rate.

This structure can create flexibility in how you draw income and manage your overall tax liability.

Tax benefits of owning property through a company

One of the biggest reasons landlords choose to use a limited company is the difference in how profits are taxed.

Corporation Tax vs Income Tax

Company profits are taxed at Corporation Tax rates (currently 25% for profits above £250,000), while individual landlords pay Income Tax on rental profits at rates of up to 45%.

For basic rate taxpayers, the benefit may be modest, but for higher or additional rate taxpayers, using a company can significantly reduce the immediate tax burden on rental income.

Full mortgage interest relief

Limited companies can still deduct all mortgage interest and finance costs as allowable business expenses.

By contrast, individual landlords can no longer deduct mortgage interest directly and instead receive a basic rate tax credit, which is less beneficial for higher-rate taxpayers.

Retaining profits in the company

If you do not need to withdraw all your rental profits immediately, you can leave them in the company. This allows you to reinvest in more properties or reduce future borrowing without triggering personal tax liabilities.

Potential downsides of using a limited company

Despite the tax benefits, there are several disadvantages to consider before transferring or buying property through a company.

Higher borrowing costs

Lenders often charge higher interest rates and require larger deposits for limited company buy-to-let mortgages. The number of lenders offering company mortgages is smaller, and arrangement fees can be higher.

Additional taxes on withdrawal

Although the company pays Corporation Tax on profits, you will also pay personal tax when taking money out as salary or dividends. This creates a potential double taxation effect if most profits are withdrawn rather than reinvested.

Costs and administration

Running a company involves extra paperwork and costs. You must file:

• Annual accounts with Companies House

• A Corporation Tax return with HMRC

• Confirmation statements and bookkeeping records

You may also need to hire an accountant familiar with property companies, which adds ongoing expenses.

Transferring existing properties can trigger tax

If you already own rental properties personally and want to transfer them to a company, you could face:

• Capital Gains Tax (CGT) on the increase in property value since purchase

• Stamp Duty Land Tax (SDLT) when the company buys the property from you

Both taxes are calculated as if the company is purchasing the property at its current market value. For landlords with large portfolios, these upfront costs can be substantial.

In some cases, landlords operating as a genuine partnership before incorporation may qualify for Incorporation Relief, which can defer CGT, but this requires meeting specific HMRC criteria.

When a limited company makes sense

Owning property through a limited company can be especially beneficial if you:

• Are a higher or additional rate taxpayer

• Plan to build a property portfolio and reinvest profits

• Do not need to draw out all rental income immediately

• Want to protect personal assets from business liabilities

• Have long-term investment goals rather than short-term cash flow needs

For smaller landlords with one or two properties or those who rely on rental income for personal living expenses, the administrative burden and double taxation may outweigh the benefits.

What happens when you sell a property held in a company

When a company sells a property, it pays Corporation Tax on any gain rather than Capital Gains Tax. The gain is calculated as the sale price minus the original purchase cost and allowable expenses.

If the proceeds are later withdrawn from the company, additional personal tax may apply on dividends or distributions.

Selling personally owned properties is often simpler, though you may pay higher CGT rates (18% or 28% depending on your tax band).

Setting up a property company

Setting up a property company is straightforward and can be done online through Companies House. However, you should plan carefully before doing so.

• Choose an appropriate company name and structure (usually a standard limited company).

• Open a separate business bank account for rental income.

• Register for Corporation Tax within three months of starting trading.

• Keep accurate records of income, expenses, and mortgage payments.

Engaging an accountant experienced in property taxation can help ensure your company structure and bookkeeping meet HMRC requirements.

Inheritance planning advantages

Another potential benefit of owning property through a company is estate planning. You can pass shares in the company to family members over time instead of transferring properties directly. This can help reduce future Inheritance Tax liabilities if managed carefully, though professional advice is essential.

Final thoughts

You can own rental properties through a limited company, and for many landlords, it offers significant tax advantages, particularly around mortgage interest relief and Corporation Tax rates. However, the decision should not be based on tax alone.

Consider the higher setup and running costs, the impact of double taxation when withdrawing profits, and the potential taxes if transferring existing properties.

For landlords planning long-term portfolio growth, a company structure can be highly efficient. For those with a small number of properties or needing regular income, personal ownership may remain simpler and more cost-effective.

Before making any changes, seek advice from a qualified accountant or tax specialist who understands property investment structures. This will help ensure that your approach aligns with your financial goals and minimises unnecessary tax costs.