Using a company to buy and rent out property differs in terms of taxes compared to doing it as an individual. In 2017, the government phased out mortgage interest tax relief for landlords, causing some to face higher income tax bills when investing in property in the UK.
The relief was replaced with a 20% tax credit, affecting higher-rate taxpayers who used to get 40% tax relief on mortgage payments. This change only impacted private landlords, whether individuals or couples.
Meanwhile, those using limited companies could still claim the same mortgage interest costs, reducing their tax bill. Limited companies also pay corporation tax rates instead of income tax rates, which can be advantageous.
However, there are drawbacks to consider. If you don’t have a mortgage or have a lower income, setting up a company might not be worth the hassle and legal fees. Additionally, if you already own a property as an individual, transferring it to a company would incur a stamp duty charge.
If you want to know more about this subject, check out our guide on buying a property through a limited company. Alternatively, you can dive into our article on stamp duty for a second property.
More UK Property Investors Operating Via Limited Companies in 2024
