If you’re thinking about buying an investment property—or already own a portfolio—one of the most common questions we’re asked is:
“How should I own my properties? Personally, or through a company?”
It’s an important question, and the right answer depends on your personal circumstances. Let’s break down the key differences to help you understand what might work best for you.
Owning Property Personally
When you own a rental property in your own name, the rental income is added to your total taxable income. That means the tax you pay on it depends on your overall income level:
- Basic-rate taxpayers pay 20%
- Higher-rate taxpayers pay 40%
- Additional-rate taxpayers can pay up to 45%
A further complication is how mortgage interest is treated. For personal ownership:
- Mortgage interest relief is restricted.
- Instead of deducting mortgage interest from your rental income in full, you pay tax on the gross rental profits before interest.
- You then get a 20% tax credit against your tax bill.
This restriction hits higher-rate (40%) and additional-rate (45%) taxpayers hardest—they’re paying higher rates on rental profits but only get 20% relief on the mortgage interest.
Owning Property Through a Limited Company
When you hold property in a limited company:
- Rental profits are taxed at 19% to 25% (depending on the company’s profits and any associated companies).
- Crucially, mortgage interest is fully deductible before calculating taxable profits.
That means you can reduce your company’s taxable profit by the full amount of interest paid—making the calculation much more straightforward.
However, there are some important considerations:
- Mortgage interest rates for limited companies are often higher than for personal buy-to-let mortgages.
- Taking money out of the company for personal use can trigger further income tax. For example, if you pay yourself dividends, there will be personal tax on those.
So Which Is Better?
There’s no one-size-fits-all answer.
Owning property through a company can be more tax-efficient for some investors—particularly higher-rate taxpayers with growing portfolios—but it doesn’t suit everyone.
With the right planning, structuring your property ownership through a limited company can also help with future inheritance tax (IHT) planning. But this needs to be considered carefully and tailored to your goals.
How We Can Help
Property tax can be complex—but with the right advice, you can ensure your investment works for you both now and in the future.
We offer expert, personalised guidance on:
- Whether personal or company ownership is better for you.
- How to structure your property portfolio to maximise tax efficiency.
- How your property strategy can support your long-term plans, including inheritance tax planning.
If this resonates with you, get in touch. Let’s talk about how we can help you plan for a successful future with your property investments.
Ready to take the next step? Contact us today for a conversation about your property plans.