What Is a Property Portfolio and How Is It Taxed

Learn what a property portfolio is, how rental income and gains are taxed and how to reduce tax on multiple investment properties.

A property portfolio is a collection of two or more properties owned as investments. This guide explains what counts as a property portfolio, how income and gains are taxed, the difference between owning properties personally or through a limited company, and in my opinion the tax traps and opportunities every landlord should understand before growing their portfolio.

Property investment remains a popular way to generate long term income and build wealth, but the tax system for landlords has become more complex in recent years. As soon as you own more than one property, especially if they are rented out, you have effectively created a property portfolio. This brings new responsibilities, more record keeping and a wider range of taxes to navigate. Understanding how different taxes apply puts you in control and helps you avoid expensive mistakes.

This article breaks down everything clearly and simply.

1. What Is a Property Portfolio

A property portfolio is a group of investment properties you own for rental income or capital growth. It can include:

  • buy to let properties

  • HMOs

  • holiday lets

  • student accommodation

  • mixed use properties

  • commercial properties

  • land held for development

  • overseas rental properties

If you own two or more of these, you effectively have a property portfolio.

A portfolio can be owned:

  • personally

  • jointly with a spouse or partner

  • through a limited company

  • in a partnership

  • inside a trust

The structure you choose affects how your portfolio is taxed.

In my opinion

Many landlords become portfolio landlords accidentally by keeping their first home as a rental when they move. They often do not realise they are now subject to different tax rules.

2. How Income From a Property Portfolio Is Taxed

If you own the portfolio personally

You pay Income Tax on your rental profits.

Rental profit =
total rental income
minus
allowable expenses

Allowable expenses include:

  • letting agent fees

  • repairs and maintenance

  • buildings and landlord insurance

  • service charges

  • accountancy fees

  • gas and electrical safety checks

  • cleaning and gardening costs

  • advertising for tenants

  • water, council tax or utilities paid by you

Mortgage interest restriction

You cannot deduct mortgage interest as an expense.
Instead you receive a 20 percent tax credit.

This hits higher rate landlords hardest because the relief is only at basic rate.

Income Tax rates

Rental income is taxed at your usual Income Tax band:

  • 20 percent basic rate

  • 40 percent higher rate

  • 45 percent additional rate

In my opinion

This is the main reason many landlords now consider using limited companies instead of personal ownership.

3. How Capital Gains Tax Applies to a Property Portfolio

If you sell a rental property for more than you paid for it, CGT usually applies.

CGT =
sale price
minus
purchase price
minus
allowable costs
minus
annual CGT allowance

CGT allowance

The allowance for 2024 to 2025 is £3,000, which is now very small.

CGT rates on residential property

  • 18 percent for basic rate taxpayers

  • 24 percent for higher and additional rate taxpayers

CGT must be reported and paid within 60 days of completion.

In my opinion

CGT is one of the biggest hidden costs for portfolio landlords, especially when selling multiple properties over a few years.

4. How Stamp Duty Land Tax Applies to a Property Portfolio

When you buy additional properties, you pay:

  • standard Stamp Duty
    plus

  • the 3 percent additional property surcharge

This applies whether you buy:

  • the second property

  • the tenth property

  • a holiday let

  • a rental

  • a house for your child

If your portfolio grows, Stamp Duty becomes one of the largest upfront costs.

5. How Corporation Tax Applies to Property Portfolios in Companies

If your portfolio is owned through a limited company, rental profits are taxed differently.

Corporation Tax applies instead of Income Tax

Corporation Tax is:

  • 19 percent for small profits

  • 25 percent for higher profits
    (depending on total company profit)

Key difference

Mortgage interest is fully deductible for companies.

This is one of the biggest reasons landlords incorporate.

Extracting money from the company

You then pay:

  • dividend tax
    or

  • salary tax
    when you take money out personally.

In my opinion

Companies are often more tax efficient for long term portfolio building, but less efficient for landlords who want to take out most of the profit every year.

6. How Inheritance Tax Applies to a Property Portfolio

A property portfolio forms part of your estate for Inheritance Tax purposes.

Inheritance Tax is usually:

  • 40 percent on the value above the nil rate bands

  • £325,000 standard allowance

  • £175,000 residence nil rate band (if conditions are met)

If properties are:

  • rented

  • not your main residence

  • not qualifying furnished holiday lets

they do not normally get IHT relief.

Trusts, companies and family arrangements can help reduce IHT but must be planned carefully.

7. When a Property Portfolio Is Treated as a Business

Most rental portfolios are not classed as a business for tax purposes.

However, if you run your portfolio like a full time business, you may qualify for special reliefs such as:

  • Business Asset Disposal Relief

  • Business Property Relief (rare for rental property)

This only applies in exceptional situations, such as:

  • very large portfolios

  • full time management

  • significant tenant services

In my opinion

Most landlords do not qualify and should not assume their portfolio counts as a trading business.

8. Furnished Holiday Lets and Sidebar Tax Rules

Furnished holiday lets (FHLs) are taxed differently from standard rentals.

They may qualify for:

  • full mortgage interest deduction

  • capital allowances

  • favourable CGT reliefs

  • potentially lower Inheritance Tax due to business treatment

To qualify, they must meet specific availability and occupancy rules.

9. What Happens if You Own Properties Jointly

Joint ownership affects:

  • how profits are split

  • who pays tax

  • CGT allowances

  • mortgage arrangements

Married couples can sometimes elect how income is split using Form 17, but only if the beneficial ownership matches.

In my opinion

Using both spouses’ allowances and tax bands is one of the best ways to reduce tax on a growing portfolio.

10. Selling Multiple Properties in a Portfolio

If you sell several properties:

  • you use one CGT allowance per person per tax year

  • you accumulate gains and losses

  • you may time sales across tax years to reduce tax

  • you must submit multiple 60 day returns

Each disposal is treated separately.

Timing is essential

Example:

Sell one property on 31 March
Sell another on 10 April

You now use two tax years and two allowances.

11. Record Keeping Requirements

You must keep records for:

  • rental income

  • expenses

  • bank statements

  • tenancy agreements

  • receipts for repairs

  • receipts for improvements

  • purchase and sale documents

  • capital expenditure

  • mileage and travel

  • agent statements

  • mortgage statements

Good records reduce tax and make CGT easier to calculate.

12. Real World Examples

Example 1: Personal portfolio taxed at higher rate

Sarah owns four rental properties personally.
Rental profits are taxed at 40 percent.
She receives only a 20 percent tax credit for mortgage interest.
She decides to stop buying personally and buys her next property through a company.

Example 2: Selling a property inside the portfolio

Tom sells one rental and makes a £45,000 gain.
After the £3,000 allowance he pays CGT on £42,000 at 24 percent.
Tax bill = £10,080.

Example 3: Spouses using both allowances

A couple own two rentals jointly.
They sell one and split the gain.
Each uses the £3,000 CGT allowance.
They save £6,000 of tax free gains between them.

Example 4: Large landlord treated as a business

A full time landlord with 30 properties and staff qualifies for certain business reliefs due to the scale of operations.
This is unusual and must be assessed carefully.

13. In My Opinion: What Landlords Should Focus On

In my opinion landlords with growing portfolios should focus on:

  • whether personal ownership or company ownership is better

  • whether mortgage interest restrictions are hurting them

  • how CGT will apply when they sell

  • planning ahead for IHT

  • using both partner’s tax bands

  • timing property sales across tax years

  • keeping proper records for improvements

The bigger the portfolio, the more difference good planning makes.

Conclusion

A property portfolio is simply two or more investment properties, but the tax system around it is complex. Rental income may be taxed at 20, 40 or 45 percent depending on your income. Gains when selling are taxed at 18 or 24 percent. Purchases attract extra Stamp Duty. Corporations are taxed differently, and inheritance rules add another layer.

In my opinion the key to running a profitable property portfolio is understanding how tax affects each stage of ownership and planning ahead so you never face avoidable tax bills.