If you’re planning to invest in property in the UK, one of the first major decisions you’ll face is whether to buy it as an individual or through a limited company. While both options are legal and widely used, each has its own tax implications, costs, and administrative requirements.
There’s no one-size-fits-all answer — the right path depends on your personal goals, income, and how you intend to use the property. In this blog, we break down the main pros and cons to help you decide whether to own property personally or through a company.
1. How Will Your Rental Income Be Taxed?
This is one of the biggest reasons investors consider using a company.
- If you own property personally, rental income is taxed as part of your overall income. For higher-rate taxpayers, this could mean up to 45% income tax. On top of that, mortgage interest tax relief is restricted — you can’t fully deduct your interest costs as you once could.
- If you own the property through a limited company, the rental profits are subject to corporation tax, which is currently lower than higher-rate personal tax. Importantly, a company can still deduct 100% of mortgage interest as a business expense, which can improve your cash flow.
However, if you want to take that income out of the company for personal use, you’ll likely pay additional tax through dividends or salary. This reduces the overall tax advantage unless you plan to leave the profits in the company or reinvest them.
2. Selling the Property: What About Capital Gains Tax?
When you sell a property at a profit, you’ll be liable for Capital Gains Tax (CGT) — but how much you pay depends on how you own it.
- Individuals get an annual CGT allowance (although this has recently been reduced), and gains above that are taxed based on your income level — typically 18% or 28% on residential property.
- Companies don’t pay CGT in the same way. Instead, they pay corporation tax on the gain, with no tax-free allowance. The way the gain is calculated can also differ due to accounting rules and possible indexation relief (for older purchases).
If you’re building long-term wealth inside a company, this may not be an issue. But if you want personal access to the proceeds, the extra tax on extracting profits might reduce your overall gain.
3. Is It Easier to Get a Mortgage Personally or Through a Company?
Mortgage availability is another factor to consider.
- For individuals, there’s a wide choice of buy-to-let mortgages with competitive rates and simpler application processes.
- For limited companies, mortgage products are more limited. Interest rates are often higher, and many lenders will require you (as a director) to give a personal guarantee. That means you could still be personally liable if the company defaults.
You should also factor in arrangement fees and lender requirements, as these can affect your overall cost of borrowing.
4. Administrative and Legal Responsibilities
Owning a property personally is relatively straightforward. You declare rental income through your Self Assessment tax return, and that’s usually it.
Owning property through a company, on the other hand, comes with added admin. You’ll need to:
- File annual accounts
- Submit a corporation tax return
- File confirmation statements
- Maintain statutory company records
If you already run a business, this might feel manageable. But if you’re new to limited companies, the extra costs (such as accounting fees) and responsibilities are worth noting.
5. Thinking About the Future: Inheritance and Succession Planning
One potential advantage of owning property through a company is flexibility in estate planning. Shares in a company can be more easily gifted or transferred than physical property.
For example, you might:
- Gradually transfer shares to children or other family members
- Use different share classes to separate ownership and control
- Potentially reduce inheritance tax liabilities with proper planning
That said, these strategies can be complex, and tax still applies — so professional advice is key.
So, Should You Use a Company to Buy Property?
There’s no universal answer. The best approach depends on your financial situation, goals, and long-term plans. Ask yourself:
- Do I need the rental income now, or can I leave profits in the company?
- Am I a higher-rate taxpayer?
- Do I want to reinvest profits into other properties?
- Is long-term wealth building or inheritance planning a priority?
- Am I comfortable with extra admin and costs?
Buying property through a limited company can offer tax advantages, especially for higher-rate taxpayers and long-term investors. But it also comes with trade-offs — including more admin, potential costs, and tax when extracting profits.
It’s always a good idea to speak with an accountant or property tax advisor before making any decisions. What works for one investor might not be right for another, especially with tax rules changing over time.
Need tailored advice for your situation?
Get in touch with our team. We’ll help you weigh the pros and cons so you can make a confident, informed decision.
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