Should You Incorporate? Tax Pros and Cons of Holding Property in a Limited Company

More UK landlords are asking: Should I put my rental property into a limited company? With changing tax rules, this decision can affect your income tax, inheritance planning, and long-term profit.

At Talwar Accountant, we work with landlords to make this choice based on numbers — not hype. Here's what you need to know if you're considering a company structure for your property.

What Does It Mean to Incorporate?

Incorporation means owning property through a limited company rather than as an individual. The company becomes the legal owner, receives the rent, pays the expenses — and files its own tax return. This has major implications for tax, administration, and flexibility.

5 Key Tax Advantages of Using a Limited Company

1. Lower Corporation Tax: 19% (or 25%) vs up to 45% personal income tax.
2. Mortgage Interest Is Fully Deductible: Unlike individuals, companies can still deduct all mortgage interest.
3. Retain Profits for Reinvestment: Avoid personal tax until withdrawal.
4. Greater Flexibility on Income Timing: Control salary vs dividends.
5. Inheritance Planning Opportunities: Use shares and trusts to pass property.

5 Key Drawbacks of Using a Limited Company

1. Higher Admin and Accounting Costs: More filings and fees.
2. Mortgage Options Are Limited: Fewer lenders and higher rates.
3. Capital Gains Tax (CGT) on Transfer: May trigger CGT or SDLT unless relief applies.
4. Dividend Tax When Extracting Profits: Up to 39.35% after corporation tax.
5. Not Always Worth It for Small Portfolios: Cost/benefit may not add up.

Example: Should Raj Incorporate?

Raj earns £18,000/year from one rental. As a 40% taxpayer, incorporation might reduce tax to 19% — but setup fees, dividend tax, and mortgage costs may offset savings. In his case, improving personal tax planning could be more effective.

When It Might Be Right to Incorporate

• You plan to buy several properties soon
• You want to retain profits for reinvestment
• You’re a higher-rate taxpayer with high mortgage interest
• You’re planning long-term succession

Our Advice

Don’t rush to incorporate because others are doing it. The best structure depends on your goals, income, future plans, and current portfolio.

We help landlords model both scenarios — personal vs company — so you can make a confident decision. Whether you're starting or scaling up, smart structuring saves money long-term.

Need clarity on incorporating your rental income?
Contact Talwar Accountant for a free consultation — we’ll help you weigh up the numbers and stay compliant.

Kind regards,
Jagdeep Singh ATT
Talwar Accountants
www.talwaraccountants.com