Owning a Property Rental Company and Being a Landlord: Ultimate Guide

As accountants specialising in landlord tax and company structures, we’ve created this guide to help UK property investors confidently navigate the rules around owning a rental company, tax obligations, and compliance requirements. Whether you're just starting or looking to optimise your portfolio, this guide is built on professional insight, tailored to landlords, and aligned with the latest 2025/26 regulations.

Is a Property Rental Company a Business?

Not all rental activity is automatically treated as a business in the eyes of HMRC. You’re typically considered to be running a property rental business when:

• You let one or more properties to generate income.

• The rental activity is ongoing, not occasional or one-off.

• You take responsibility for property management and tenant relations.

Importantly, a property rental business is not the same as a trading business. This distinction affects tax treatment, mortgage availability, and reliefs such as Business Asset Disposal Relief (BADR), which generally isn’t available for passive rental income.

Buying Property – Stamp Duty & Regional Variations

When buying property for rental purposes, investors must account for additional Stamp Duty surcharges:

• England & Northern Ireland: +3% Additional Stamp Duty on top of standard SDLT bands.

• Scotland: An 8% Additional Dwelling Supplement (ADS) under Land and Buildings Transaction Tax (LBTT).

• Wales: Land Transaction Tax (LTT) with a higher surcharge for buy-to-let purchases.

💡 Company purchases are not exempt from these surcharges—even for first properties.

Stamp Duty must be paid within 14 days of completion (30 days in Scotland/Wales), and failure to meet this deadline can result in penalties.

Owning Personally vs Through a Limited Company

Personal Ownership

• Simpler setup and no need to file company accounts.

• Mortgage interest relief restricted to 20% tax credit for individuals.

• Rental income taxed at personal income tax rates (20%, 40%, 45%).

Limited Company Ownership

• Full mortgage interest deductibility for companies.

• Profits taxed at Corporation Tax rates (19% or 25% depending on profit level).

• Opportunity to retain profits in the company or extract via salary/dividends.

• Setup and annual compliance costs (e.g., accounts to Companies House, CT600 to HMRC).

• Transferring personally owned properties to a company may trigger Capital Gains Tax and Stamp Duty.

✅ Company ownership often benefits higher-rate taxpayers and long-term investors.

Feature	Personal Ownership	Limited Company Ownership
Mortgage Interest Relief	20% basic rate relief only	Fully deductible as an expense
Tax Rate on Profits	20%, 40%, or 45% Income Tax	19–25% Corporation Tax
Administrative Requirements	Self Assessment only	Accounts to Companies House + CT600 to HMRC
Profit Extraction	Direct income to individual	Via salary or dividends (additional tax)
CGT When Selling	18% or 24% (after allowances)	Subject to Corporation Tax rates

Tax Obligations on Rental Income & Profits

Personally Owned Properties

• Income added to your total taxable income.

• Expenses such as letting agent fees, maintenance, and insurance are deductible.

• Must submit a Self Assessment tax return if rental income exceeds £1,000/year.

Rental Company

• Income taxed at Corporation Tax rates.

• Directors must file a personal tax return if they receive dividends or salary.

• Allowable expenses include mortgage interest, repairs, accountant fees, and more.

🧮 Example:

• £20,000 rental profit:

  • Personally: Could face up to 40% tax = £8,000.

  • Company: Corporation tax at 19% = £3,800.

Capital Gains & Property Disposal Taxes

Personal Ownership

• Capital Gains Tax (CGT) applies when you sell a property at a gain.

• Rates: 18% (basic rate) or 24% (higher rate) on residential property.

• £3,000 CGT annual exemption (2025/26).

Company Ownership

• Gains taxed as corporation tax (19%-25%).

• No CGT exemption, but indexation allowance (for pre-2018 assets) may apply.

If selling a personally owned property, you must report and pay CGT within 60 days of completion.

Furnished Holiday Lets (FHLs) & Rent-a-Room Relief

FHLs have historically enjoyed favourable treatment, such as:

• Capital allowances on furniture.

• Potential CGT reliefs on sale.

❗However, from April 2025, FHL tax benefits will be abolished, aligning them with standard rental rules.

Rent-a-Room Scheme

• Rent out a room in your own home tax-free up to £7,500/year.

• Applies only to live-in landlords.

Regulatory Compliance for Landlords

Being a landlord isn’t just about receiving rent—it carries serious legal responsibilities:

• Tenancy Deposits: Must be protected within 30 days in a government-approved scheme.

• Gas Safety Checks: Mandatory annual inspection and CP12 certificate.

• Energy Performance Certificate (EPC): Property must be rated E or above.

• Right to Rent Checks: Landlords must verify tenant immigration status.

• Electrical Safety: Five-yearly inspections for fixed installations.

🚫 Failing to meet any of these can void Section 21 eviction rights and result in fines.

Insurance Requirements

Basic home insurance is not sufficient for rental properties.

Recommended cover includes:

• Landlord Buildings Insurance

• Contents Insurance (if furnished)

• Public Liability Cover

• Loss of Rent Insurance

• Legal Expenses Insurance

Tenants should hold their own contents insurance.

Record Keeping & HMRC Expectations

Good record-keeping is crucial to avoid tax investigations and penalties. Keep:

• Rental agreements

• Receipts for repairs

• Mortgage statements

• Letting agent invoices

• Mileage logs (if claiming travel)

Digital tools such as FreeAgent, Xero, or QuickBooks can streamline this—particularly with Making Tax Digital for Income Tax (MTD ITSA) coming in 2026.

2025 Property Market Trends & Strategic Shifts

• Rising interest rates and tougher regulation have squeezed margins.

• Increasing numbers of landlords are incorporating to regain mortgage interest relief and control cash flow.

• Over 400,000 property companies now exist in the UK, up 200% in the past decade.

• The government’s abolishment of FHL benefits and increasing energy efficiency standards signal a shift towards professionalisation of the sector.

Why Work With a Property Tax Accountant?

As a firm of qualified accountants who specialise in property tax, we offer:

• Tailored tax advice on incorporation, reliefs, and exit planning.

• Full compliance with Companies House and HMRC filing.

• Strategic planning for income extraction, CGT, and inheritance.

👋 Whether you're a portfolio landlord, incorporating your first property, or navigating complex tax returns—we can help you make confident, tax-efficient decisions.