If you’re serious about property development, one of the most important decisions you’ll face is how to structure your property ownership. While it might seem like a technical detail you can sort out later, getting this right from the start can save you significant amounts in tax and give you much more flexibility as your portfolio grows.

The choice between holding properties personally or through a limited company isn’t just about tax rates – it affects everything from how you finance deals to your exit strategies and the complexity of your ongoing compliance.

Personal ownership – the traditional approach

Many property investors start by holding properties in their own name, and for good reason. It’s straightforward, familiar, and can work well in certain circumstances.

The tax landscape

When you hold property personally, rental income is added to your other income and taxed at your marginal rate. For basic rate taxpayers, this means 20% tax, but if your property income pushes you into higher rate territory, you’ll pay 40% or even 45% on the additional income.

Capital gains tax applies when you sell, with rates of 18% for basic rate taxpayers and 24% for higher rate taxpayers on residential property. You do get an annual exemption (£3,000 for 2025/26), but this can quickly become insignificant as your portfolio grows.

Mortgage interest relief

This is where personal ownership has become less attractive in recent years. Since April 2020, you can no longer deduct mortgage interest as a business expense against rental income. Instead, you get a tax credit worth 20% of your mortgage interest costs.

For higher-rate taxpayers, this creates a significant disadvantage. If you’re paying 40% tax on rental profits but only getting 20% relief on mortgage interest, the effective cost of borrowing has increased substantially.

Financing considerations

Personal buy-to-let mortgages are well-established, and lenders generally understand this market. Rates for individuals are often more competitive and the application process is typically more straightforward if you meet the lending criteria.

MTD for Income tax

When properties are owned personally from April 2026 there may become and obligation to report income and expenses quarterly to HMRC through MTD for income Tax

Link to MTD page

Limited company ownership – the modern approach

Holding properties through a limited company has become increasingly popular, among property investors and developers.

Corporation tax advantages

Limited companies pay corporation tax on their profits, which is currently at a marginal rate at 26.5% for profits between £50,000 -£250,000 (with a small profits rate of 19% for profits up to £50,000). This can represent significant savings compared to personal tax rates of 40% or 45%.

Perhaps more importantly, companies can still deduct mortgage interest as a business expense against rental income. This makes leveraged property investment much more tax-efficient through a company structure.

Financing and scaling

Many specialist lenders now offer buy-to-let mortgages to limited companies however for start up companies this is often at a premium.

Commercial lenders tend to take a more sophisticated approach to assessing rental income, which can help when you’re building a substantial portfolio.

Flexibility for reinvestment

One of the key advantages of company ownership is the ability to retain profits within the business. Rather than paying personal tax on rental income, you can keep profits in the company to fund future acquisitions, improvements, or debt reduction.

This creates a powerful compounding effect – for higher rate tax payers instead of paying 40% or more tax and reinvesting what’s left, you pay 19 or 26.5% corporation tax and reinvest a much larger amount.

The practical considerations

Getting money out

The main drawback of company ownership is that getting money out for personal use involves additional tax charges. You’ll typically pay corporation tax on company profits, then personal tax when you extract money as salary, dividends, or when you eventually wind up the company.

However, if you’re genuinely reinvesting most of your property income into growing your portfolio, this may not be a significant issue in the early years.

Compliance and administration

Running a limited company involves more paperwork than personal ownership. You’ll need to file annual accounts, corporation tax returns, and confirmation statements. Most property investors find they need professional help with this compliance work.

The additional professional fees are usually more than offset by the tax savings, but it does add a layer of complexity to your business.

Capital gains and exit strategies

When a company sells property, it pays corporation tax on the gain rather than capital gains tax. The rates can be similar, but companies don’t get the annual exemption that individuals receive. You may also face subsequent challenges of in extracting the money from the company in the form of personal tax.

However, if you eventually sell the company itself (rather than the properties), you will be subject to personal capital gains tax on the sale of the shares rather than income tax.

Making the right choice for your situation

The optimal structure often depends on your specific circumstances and objectives.

Personal ownership might work better if:

  • You’re a basic rate taxpayer and likely to remain so
  • You want to extract most of your rental income for personal use
  • You’re planning a relatively small portfolio
  • You prefer simplicity and minimal compliance requirements

Company ownership often makes sense if:

  • You’re already a higher rate taxpayer or property income will make you one
  • You’re planning to reinvest most profits into growing your portfolio
  • You want to scale
  • You’re comfortable with additional compliance requirements

Hybrid approaches

Some investors use a combination of both structures. You might hold your first few properties personally, then switch to a company structure as you scale up. Alternatively, you might keep a property or two in your personal name for flexibility while building the main portfolio through a company.

Timing and transitioning

If you already own properties personally and are considering moving to a company structure, this involves selling the properties to your company. This creates a disposal for capital gains tax purposes there can also be stamp duty considerations, so timing and planning become crucial.

Some investors choose to keep existing properties in their personal name while acquiring new properties through a company. Others bite the bullet and transfer everything, particularly if they haven’t built up significant capital gains yet.

Getting the structure right from the start

Property ownership structure isn’t something you want to get wrong and fix later. The costs and tax implications of changing structure can be significant, so it’s worth getting professional advice before you make your first serious acquisition.

At Smethurst & Co, we work with property investors and developers at all stages of their journey. We can model the tax implications of different structures based on your specific circumstances and help you understand how your choice will affect your ability to scale and extract value from your portfolio.

The property market offers genuine opportunities for those who approach it professionally, but the tax and structuring aspects can be complex. Getting these fundamentals right from the beginning can make the difference between a portfolio that works hard for you and one that’s held back by avoidable tax inefficiencies.

Ready to discuss your property structure?

If you’re serious about property development and want to ensure you’re structuring your investments optimally, Smethurst & Co can help. We can review your plans, explain the implications of different approaches, and help you implement a structure that supports your long-term objectives.

You can reach us on 01472 357125 or email advice@smethurstandco.com to arrange a property structure consultation.