Income Tax versus Corporation Tax
An individual pays Income Tax on taxable rental profits using their applicable rates and allowances. A UK property company ordinarily pays Corporation Tax on its taxable profits. For financial year 2026 the Corporation Tax small-profits rate is 19% and the main rate 25%, with marginal relief within the published limits (£50,000 to £250,000), subject to adjustments for associated companies and other rules.
If shareholders want to spend the profits personally, payments by dividend, salary or other extraction can have further tax consequences. Retaining money in the company for future property investment is a very different comparison from drawing every pound as household income.
Borrowing and interest treatment
The specific restriction on individual residential finance-cost relief does not operate in the same way for companies, although general company-loan relationship and anti-avoidance rules still need analysis. Corporate borrowing may involve different rates, fees, deposits, lender criteria, director guarantees and refinancing risk.
A lender normally requires the purchasing company, rather than an existing individual borrower, to hold title and grant the security. The company route should not be presented as a method to keep an existing personal mortgage unchanged while moving the tax liability.
Why moving an existing buy-to-let into a company is not a paper exercise
A connected-company transfer commonly crystallises a market-value disposal for CGT and can attract market-value SDLT even if the owner receives shares rather than cash. Mortgage redemption and new financing are often needed. There may be separate legal, valuation, Land Registry and lender expenses.
An individual should not assume that a historic gain disappears on incorporation or that general incorporation relief automatically applies to a passive letting arrangement. Only property-business facts meeting the relevant conditions can support any relief.
ATED and corporate SDLT
The Annual Tax on Enveloped Dwellings (ATED) may affect corporate owners of UK residential property valued above £500,000. Relief can be available for genuine third-party commercial letting, but an ATED or relief-declaration return may still be required.
Certain corporate acquisitions of higher-value dwellings attract a special SDLT regime; reliefs for genuine property rental businesses can apply subject to conditions. A company does not always remove the 2% non-resident supplement where the relevant control or residence tests apply.
What about succession and an overseas company?
Company shares may make some ownership changes administratively different from transferring a property itself, but share transfers can bring their own tax, reporting, financing and inheritance implications.
An offshore company holding UK residential property does not automatically remove UK tax, IHT exposure or reporting requirements. A professional comparison should cover both current annual returns and the eventual sale or transfer of shares and assets.