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If you're considering buying a property, especially as an investment, one of the key decisions you'll face is whether to hold it personally or through a limited company. This choice can have long-term tax, financial, and administrative implications, and there’s no one-size-fits-all answer.

Here’s a look at some of the main considerations.

Tax on Profits

One of the most common reasons people use a limited company is the difference in how profits are taxed.

If you own a property personally, rental profits are taxed as income. If you are a higher-rate taxpayer that could mean a tax rate of up to 45%. Mortgage interest relief is also restricted under current rules, meaning higher-rate taxpayers can no longer deduct all their finance costs.

With a limited company, rental profits are subject to corporation tax, and all mortgage interest can be treated as a business expense.

However, if you want to take money out of the company, usually done through dividends or salaries, there is likely to be further tax to pay. So, the benefits depend on what you plan to do with the income.

Tax on Selling the Property

If the property is sold at a profit, there are differences in how Capital Gains Tax (CGT) applies.

Individuals have a CGT tax-free allowance with the rate of tax paid depending on their income and the property type. Companies on the other hand simply pay corporation tax on the gain. However, companies have no tax-free allowance and there can be different rules that apply to how the gain is calculated.

Again, the right route depends on your plans - whether you're building long-term wealth inside a company or want easier access to the proceeds personally.

Mortgage Availability and Costs

Getting a mortgage through a limited company can be more complicated and is often more expensive, with fewer lenders and potentially higher interest rates. Lenders will also usually require a personal guarantee from the directors.

Administrative and Legal Responsibilities

A company comes with extra administrative and legal responsibilities. There’s filing annual accounts, confirmation statements, corporation tax returns, and keeping proper records that all need to be considered. If you already run a company, this might not be an issue, but if not, it’s important you factor in the time and cost.

Inheritance and Succession Planning

Owning property through a company can offer more flexibility in passing wealth on to family members. Shares in a company can be gifted or passed on more easily than physical property - though care is still needed because of tax implications.

So What’s Best?

The best option depends on your goals: whether you need the income now, plan to reinvest profits, want to keep things simple, or are thinking long-term about passing assets to others. There’s no single answer - and the rules can change over time.

We have a ‘Property – in or Out?’ tool that we can use to help you determine whether it is better for you to own property inside or outside of a company. If you're unsure which route suits you best, this tool is a great place to start. Please get in touch and we would be happy to help you!