Can I Own Rental Properties Through a Limited Company

At Towerstone Accountants we provide specialist property accountant services for landlords property investors and individuals dealing with property tax and reporting obligations across the UK. This article has been written to explain Can I own rental properties through a limited company in clear practical terms so you understand how the rules apply in real situations. Our aim is to help you make informed decisions avoid costly mistakes and know when professional advice is worthwhile.

This is a question I am asked almost weekly, usually by landlords who are feeling the pressure of higher tax bills, mortgage interest restrictions, or who are planning long term property investment rather than short term income. The short answer is yes, you absolutely can own rental properties through a limited company, but whether you should is a far more nuanced question.

Owning property through a company changes how tax works, how profits are extracted, how borrowing is structured, and how future plans such as reinvestment, retirement, or passing wealth on are handled. In this article I will explain how company ownership works, the advantages and disadvantages, and the situations where it makes sense and where it often does not. Everything here is grounded in current UK tax rules as applied by HM Revenue & Customs and guidance published on GOV.UK, alongside practical experience advising landlords.

The basic position in UK law

There is nothing in UK law that prevents a limited company from owning residential or commercial rental property.

A limited company can:

Buy property

Take out mortgages

Receive rental income

Pay expenses

Sell property

Make profits or losses

The company is treated as a separate legal person from you as an individual. This separation is at the heart of both the benefits and the drawbacks.

How rental property ownership differs between individuals and companies

Before comparing pros and cons, it is important to understand that property owned personally and property owned by a company are taxed in fundamentally different ways.

Personally owned rental property is taxed under the income tax system.

Company owned rental property is taxed under the corporation tax system.

That difference alone drives most of the planning.

Tax treatment of rental income in a limited company

When a limited company owns rental property, the rental profits are subject to corporation tax, not income tax.

Currently, corporation tax rates range depending on profits, and are often lower than higher and additional rate income tax.

Key points include:

Rental income is company income

Allowable expenses are deducted

Mortgage interest is fully deductible

Corporation tax is paid on net profits

This is a major contrast with personal ownership, where mortgage interest relief is restricted.

Mortgage interest and why this matters so much

One of the biggest drivers behind incorporating property portfolios has been the restriction on mortgage interest relief for individual landlords.

For personally owned property:

Mortgage interest is no longer fully deductible

Relief is given as a basic rate tax credit

Higher and additional rate landlords are hit hardest

For company owned property:

Mortgage interest is treated as a normal business expense

It is deducted in full before tax

There is no restriction equivalent to Section 24

For leveraged portfolios, this difference can be dramatic.

Corporation tax vs income tax

Another key difference is the rate of tax applied to profits.

Personally owned property profits are taxed at:

20 percent for basic rate taxpayers

40 percent for higher rate taxpayers

45 percent for additional rate taxpayers

Company owned property profits are taxed at corporation tax rates, which may be lower, particularly where profits are retained rather than extracted.

However, this is only half the story.

Extracting profits from a property company

A limited company may pay less tax on profits initially, but you then need to get the money out.

This is where many people underestimate the complexity.

Common ways to extract profits include:

Salary

Dividends

Director’s loan repayments

Pension contributions

Each method has its own tax implications.

For example:

Dividends are taxed personally

Salaries trigger PAYE and National Insurance

Leaving profits in the company avoids immediate personal tax

This means company ownership often works best for long term reinvestment rather than immediate income.

Reinvesting profits inside the company

One of the strongest arguments for using a limited company is reinvestment.

If profits are left inside the company:

Only corporation tax is paid

No personal tax arises at that stage

Funds can be used to buy more property

Growth can be faster over time

This structure suits landlords who are building a portfolio rather than living off the income.

Capital gains tax vs corporation tax on sale

Selling property is also taxed differently depending on ownership.

For individuals:

Capital Gains Tax applies

Annual CGT allowances may apply

Rates depend on income level

For companies:

Gains are subject to corporation tax

There is no annual CGT allowance

Indexation allowance is no longer available

Gains increase company profits

While rates can sometimes be similar, the lack of allowances in companies can reduce the benefit.

Getting money out after selling property

Another often overlooked issue is what happens after a company sells a property.

The company pays corporation tax on the gain.

If you then want to extract the cash:

Dividends may be taxed personally

This creates a second layer of tax

The combined tax cost can be higher than personal ownership

This is why company ownership is often better for long term holding rather than short term flipping.

Stamp Duty Land Tax considerations

Stamp Duty Land Tax is higher for companies in many cases.

Key points include:

Companies usually pay the 3 percent surcharge

There is no main residence relief

Certain high value residential properties face additional charges

Reliefs are limited

For landlords buying multiple properties, this additional upfront cost needs careful consideration.

Transferring existing properties into a company

This is one of the most misunderstood areas.

You cannot simply “move” a property into a company.

In most cases, transferring property to a company is treated as:

A sale at market value

Subject to Capital Gains Tax personally

Subject to Stamp Duty Land Tax in the company

This can make incorporation prohibitively expensive for existing portfolios.

There are limited exceptions, but they are complex and require specialist advice.

Mortgage availability and interest rates

Company buy to let mortgages differ from personal ones.

Common differences include:

Higher interest rates

Larger deposit requirements

Personal guarantees often required

Fewer lenders available

While the gap has narrowed in recent years, financing through a company is still usually more expensive.

Administrative and running costs

Owning property through a company brings additional administration.

This typically includes:

Company accounts

Corporation tax returns

Confirmation statements

Payroll if salaries are paid

Dividend paperwork

Separate bank accounts

These costs are manageable, but they are higher than owning property personally.

Limited liability, how real is the protection?

Many people assume a limited company automatically protects personal assets.

In property, this protection is often limited.

Why:

Lenders usually require personal guarantees

Directors can still be personally liable

Legal claims can pierce protection in some cases

The limited liability benefit exists, but it is not absolute.

Inheritance tax and succession planning

One area where companies can offer flexibility is long term planning.

Potential benefits include:

Easier transfer of shares than property

Ability to involve family members

More control over income distribution

Potential use of family investment structures

However, inheritance tax planning with property companies is complex and requires bespoke advice.

VAT considerations for rental properties

Most residential rents are VAT exempt, whether owned personally or through a company.

This means:

No VAT is charged on rent

VAT on costs is usually not reclaimable

Commercial property is different, particularly where an option to tax is in place.

The ownership structure does not change the basic VAT position, but it affects how VAT is managed.

When owning property through a company often makes sense

In practice, company ownership often suits landlords who:

Are higher or additional rate taxpayers

Have significant mortgage interest

Want to reinvest profits long term

Are building a portfolio

Do not need immediate personal income

Are starting from scratch rather than transferring properties

In these cases, the numbers can be compelling.

When personal ownership is often better

Personal ownership may be more suitable where:

Properties are unencumbered or lightly mortgaged

Rental profits are modest

The landlord is a basic rate taxpayer

Income is needed personally

Properties may be sold in the medium term

Administrative simplicity is preferred

There is no one size fits all answer.

Common mistakes I see in practice

These issues come up repeatedly:

Incorporating without understanding extraction tax

Transferring properties without modelling SDLT and CGT

Assuming company tax is always lower

Ignoring mortgage cost differences

Overestimating limited liability protection

Setting up companies without long term plans

Most of these mistakes are avoidable with proper modelling.

A simple way to think about the decision

A practical rule of thumb is this:

Companies suit growth and reinvestment

Personal ownership suits income and simplicity

Where you sit on that spectrum matters more than headline tax rates.

The importance of forward planning

The biggest mistake landlords make is focusing only on the current tax year.

Property ownership decisions have long term consequences.

You should always consider:

How long you plan to hold properties

Whether you will need income

Whether you plan to sell

Retirement planning

Family and succession goals

Once properties are in a company, reversing the decision is usually expensive.

Getting advice before you act

This is an area where advice genuinely pays for itself.

Before buying or transferring property, a proper review should include:

Side by side tax comparisons

Cash flow modelling

SDLT and CGT projections

Mortgage cost analysis

Exit strategy planning

Generic advice or online calculators are rarely sufficient.

Final thoughts on owning rental property through a limited company

Yes, you can own rental properties through a limited company, and for the right person, it can be a powerful and tax efficient structure. However, it is not a silver bullet, and in some cases it can increase tax and complexity rather than reduce it.

The key is understanding that company ownership changes not just how much tax you pay, but when you pay it, and how you access your money. If you are building a long term portfolio and reinvesting profits, a company can work extremely well. If you want simplicity and personal income, personal ownership often wins.

The right answer depends entirely on your circumstances, and the cost of getting it wrong is far higher than the cost of getting advice before you commit.

You may also find our guidance on Do I pay Capital Gains Tax when selling a rental property and Do I pay National Insurance on property income useful when exploring related property tax questions. For a broader overview of property tax reporting and planning topics you can visit our property hub which brings all related guidance together.