Structure: personal vs limited company
| Personal | Limited Company | |
|---|---|---|
| Income tax | 20–45% | 19–25% (CT) |
| Mortgage interest | 20% credit only | Fully deductible |
| Mortgage rates | Cheaper, more lenders | Pricier, fewer lenders |
| Extraction | None (you own the income) | Dividend/salary tax on extraction |
| CGT on sale | 18–24% | CT on gain + tax on extraction |
| SDLT on transfer | n/a | Full SDLT including 3% surcharge |
Rule of thumb: limited company wins for highly geared, growing portfolios held long term. Personal ownership often wins for low-gearing or near-retirement landlords.
Annual planning levers
- Use the £3,000 CGT allowance (2024/25) every year by transferring slices to a spouse before sale
- Pair gains with losses — sell loss-making properties in the same tax year
- Time exchange/completion to fall in the right tax year
- Pension contributions reduce adjusted net income — restores the personal allowance and reduces dividend tax band
Capital Gains Tax on disposal
- Residential rate (2024/25): 18% basic-rate, 24% higher-rate
- Reporting and payment due within 60 days of completion via the UK Property Account
- Private Residence Relief reduces CGT for any period the property was your main home + the last 9 months
Succession & inheritance
- Property qualifies for Business Relief only in narrow cases (e.g. furnished holiday lets meeting trading tests — and FHL rules end April 2025)
- Use Family Investment Companies for multi-generational portfolios
- Annual gifting (£3,000/year) and 7-year potentially exempt transfers reduce IHT exposure
Common planning mistakes
- Transferring to a company without claiming s.162 incorporation relief — triggers a large CGT bill
- Forgetting the 3% SDLT surcharge on second-property purchases or transfers into a company
- Ignoring stamp duty multiple dwellings relief when buying portfolios
- Holding holiday lets in the wrong structure post-April 2025
Portfolio over £1m? Speak to us about an annual tax-planning review. Book a session.