Personal vs Limited Company Ownership

Personal vs Limited Company Ownership — Portfolio Perspective

For landlords with growing portfolios, the ownership structure decision becomes increasingly significant. The tax differential between personal and corporate ownership widens as rental income increases.

Tax Efficiency at Scale:

• Higher-rate taxpayers pay 40% income tax on rental profit; a company pays 25% corporation tax
• Section 24 restricts mortgage interest relief for personal landlords — companies are unaffected
• Retained profits in a company are not subject to personal tax until extracted
• Dividend extraction: £500 dividend allowance; 8.75% (basic), 33.75% (higher), 39.35% (additional)

Mortgage Considerations at Scale:

• Limited company buy-to-let mortgages are widely available but typically 0.5–1% higher rate
• Lenders assess the company's rental income and director's personal income
• Portfolio landlords (4+ mortgaged properties) face stricter stress-testing
• Transferring existing properties into a company triggers SDLT and CGT — usually prohibitive

Extraction Strategies:

• Salary up to the NIC threshold (£12,570): tax-free and NIC-efficient
• Dividends above the allowance: taxed at dividend rates
• Pension contributions: highly tax-efficient extraction method
• Director's loan: interest-free loans up to £10,000; above that, benefit-in-kind applies

Succession Planning:

• Shares in a property company can be gifted or transferred more easily than property
• Business Property Relief (BPR) does not apply to investment property companies
• Consider a family investment company (FIC) structure for IHT planning