Selling Property to a Limited Company | Tax Benefits & Pitfalls Explained

Understanding selling property to a limited company has become increasingly important for UK landlords. Since the April 2020 mortgage interest relief changes, many investors have faced higher tax bills and tighter margins. As a result, moving properties into a limited company can offer long-term tax efficiency and flexibility but it’s not without its risks.

At KSM Consulting Ltd, we advise landlords across the UK on whether transferring properties into a Buy-to-Let Special Purpose Vehicle (SPV) is the right move. Here’s what to consider.

Why Landlords Are Selling Property to a Limited Company

For higher-rate taxpayers, selling property to a limited company can lead to better tax outcomes and reinvestment opportunities.

1. Lower Tax on Rental Profits

Individuals pay up to 45% tax on rental income. Limited companies, however, pay Corporation Tax, 19% (rising to 25% for profits over £250,000). That’s a potential saving of thousands per year.

2. Reinvest Profits More Efficiently

Profits retained within the company can be used for new property purchases, renovations, or debt repayments without triggering personal tax. This supports portfolio growth while maintaining cash flow.

3. Use Equity as a Director’s Loan

When you transfer your property, the equity can be recorded as a Director’s Loan. The company can repay this gradually, allowing you to withdraw funds tax-free later.

4. Maintain Full Control

Even though the company is a separate legal entity, you remain in control as the director and shareholder, managing the portfolio strategically.

How Selling Property to a Limited Company Works

The process mirrors a normal sale, meaning Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT) may apply.
Most landlords create a Buy-to-Let SPV before transferring, lenders prefer this structure and it simplifies long-term management.

At KSM Consulting Ltd, we support clients from SPV setup and tax analysis to conveyancing and completion.

Stamp Duty Land Tax (SDLT) When Selling Property to a Limited Company

• SDLT is based on the property’s market value, even if sold below price.

• 15% SDLT applies to residential properties above £500,000.

• Reliefs may exist for genuine rental businesses.

🔗 You can check the current SDLT rates on GOV.UK.

Capital Gains Tax (CGT) Implications

HMRC treats transfers between you and your company as market-value transactions, even if you sell for £1.
Because you and your company are connected persons, you must calculate any gain accurately to avoid penalties.

We help clients compute the gain, apply relevant reliefs, and file compliant CGT reports with HMRC.

Does the Company Need to Be Trading?

No. A limited company can own property without active trading. HMRC will classify it as dormant, but you must still:

• File annual accounts and a confirmation statement.

• Submit a Corporation Tax return (even if nil).

💡 KSM Tip: Professional accounting support prevents filing delays and avoids late penalties.

Disadvantages of Selling Property to a Limited Company

While the tax savings can be substantial, there are drawbacks:

1. Higher Mortgage Rates: Company buy-to-let mortgages tend to be more expensive.

2. Increased Administration: You’ll need to maintain records, file accounts, and handle HMRC compliance.

3. Dividend Tax: Withdrawing profits as dividends attracts additional tax beyond the £500 allowance.

4. Upfront Costs: SDLT, CGT, and legal fees can add up quickly.

KSM Consulting’s Expert

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Selling property to a limited company can be an excellent long-term tax strategy, but it’s not a one-size-fits-all solution.
The right choice depends on your tax band, mortgage status, and long-term investment goals.

At KSM Consulting Ltd, our property tax experts will:

• Review your current and future tax exposure.

• Calculate SDLT and CGT impact.

• Guide you through SPV formation and compliance.

• Liaise with solicitors and lenders to manage the full process.

Call: 0208 672 3411 Email: info@theksma.co.uk Visit: www.theksma.co.uk