Should You Form a Limited Company to Hold Your Property Portfolio?
By KSM Consulting Ltd | Property Tax & Accountancy Experts in London
Should You Form a Limited Company to Hold Your Property Portfolio?
Should you form a limited company to hold your property portfolio? It’s a question more landlords are asking since Section 24 reduced mortgage interest relief for individuals.
Limited companies have become popular for managing rental income more efficiently but incorporation isn’t always the best move for everyone.
This article from KSM Consulting Ltd explains the advantages, disadvantages, and tax implications of owning property through a company.
1. Why So Many Landlords Are Incorporating
The main reason landlords form limited companies to hold property portfolios is tax efficiency. HMRC Section 24, introduced between 2017 and 2020, restricted mortgage interest relief for individual landlords, but companies can still deduct full interest as an expense.
Higher-rate taxpayers, therefore, often benefit by holding properties in a company structure where the Corporation Tax rate (19–25%) is lower than personal income tax rates (up to 45%).
KSM Tip: If you’re a high earner or planning to expand your portfolio, a company could reduce your long-term tax burden.
2. Advantages of Owning Property Through a Limited Company
Lower Tax Rates on Rental Income
Companies pay Corporation Tax between 19% and 25% instead of personal income tax up to 45%. This difference can save thousands annually for higher-rate taxpayers.
Full Deduction of Mortgage Interest
Limited companies can deduct full mortgage interest, while individuals receive only a 20% tax credit.
Inheritance Tax (IHT) Planning
Transferring shares in a property company (rather than properties themselves) can reduce Inheritance Tax exposure and enable smoother succession planning.
Limited Liability Protection
A company structure separates your personal assets from business risk; protecting you if the property business faces financial trouble.
3. Disadvantages of Holding Property in a Limited Company
Higher Mortgage Costs
Company mortgages usually have higher interest rates and arrangement fees, and personal guarantees are often required.
Personal Tax on Withdrawals
When profits are withdrawn as dividends, they’re subject to dividend tax — currently 8.75%, 33.75%, or 39.35%.
Additional Administration
Companies must file annual accounts, Corporation Tax returns, and confirmation statements; increasing compliance costs.
Capital Gains Limitations
Companies pay Corporation Tax on capital gains and do not qualify for Principal Private Residence Relief (PPR) or the annual £6,000 CGT exemption available to individuals.
The decision on whether you should form a limited company to hold your property portfolio depends on your income level, mortgage use, and long-term goals.
KSM Insight: A company structure suits long-term investors; not those likely to live in their properties or sell frequently.
4. Key Questions Before You Form a Limited Company to Hold Your Property Portfolio
Before deciding should you form a limited company to hold your property portfolio, review how incorporation fits your wider financial strategy.
Ask yourself:
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Can you allocate income to a lower-earning spouse?
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Do you need all profits personally, or can you leave them in the company?
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Will you use mortgages to expand your portfolio?
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Is your goal to pass property to family or build long-term wealth?
The answers will determine whether incorporation works for your situation.
5. KSM Consulting’s Expert View
At KSM Consulting Ltd, we help landlords compare personal vs. company ownership and evaluate CGT, SDLT, and IHT implications before restructuring. We form SPVs, model ownership scenarios, and design strategies that protect assets while reducing tax exposure.
KSM Tip: Incorporation isn’t just about tax, it’s about strategy, succession, and sustainable portfolio growth.
Final Thoughts
So — should you form a limited company to hold your property portfolio? For many landlords, yes, especially those with high leverage or long-term goals. But personal circumstances, mortgage options, and exit plans matter just as much as the headline tax rate.
For tailored advice, contact KSM Consulting Ltd, your trusted property tax specialists in London.
📞 Call us: 0208 672 3411
📧 Email: info@theksma.co.uk
🌐 Visit: www.theksma.co.uk