the market value (including the 3% surcharge for additional properties).

• Capital gains tax (CGT): On transfer of a property, a gain must be calculated based on market value. However, incorporation relief may allow you to defer this gain until you dispose of shares.

• Connected-party rules: Because the company and you are “connected parties,” HMRC may impose stricter rules on the valuation and timing.

You must weigh these upfront costs against the anticipated future benefits of using a property company.

Setting up a new company

If instead you form a property company from scratch and acquire properties through it, you avoid a double SDLT charge (i.e. you don’t first buy personally then transfer).

However, you still face the 3 % residential surcharge on purchases by companies owning residential property — even if this is your first property.

The surcharge is payable on top of the standard SDLT rates.

Tax on rental profits within a property company

In a property company, rental profits are taxed via corporation tax. As of April 2023, the corporation tax rate for profits up to £50,000 is 19 %, profits from £50,000 to £250,000 are taxed at a marginal rate between 19 % and 25 %, and profits above £250,000 are taxed at 25 %.

That structure replaced the previous flat 19 %.

One benefit is that a property company is not subject to the interest-deduction limitation that restricts tax relief on finance costs for individual landlords.

So the company can deduct interest and finance costs in full (subject to normal business accounting rules).

Withdrawing profits from a property company

Because a property company is separate from you, profits are not automatically yours.

You must extract them — typically as salary, bonus or dividends — each of which may trigger further tax and National Insurance.

For example, dividends are subject to dividend tax at your marginal rate (after any allowance), which can reduce the effective yield from the business.

Sale of property held in a property company

If the property company sells a property and realises a gain, the gain is taxed via corporation tax (at whatever rate applies to that accounting period).

The company does not benefit from the annual exempt amount that individuals would for capital gains.

By contrast, if you sell the property personally (outside a company), you might pay capital gains tax at residential rates (18 % or 28 %) and could use the annual exempt amount (which for 2025/26 is £6,000 and possibly dropping in future budgets).

Always check the current exempt thresholds.

In recent times, HMRC rules have tightened around reporting deadlines and payment windows for residential property gains: gains must generally be reported and tax paid within 60 days of completion.

Other practical considerations for company

• Cash flow and liquidity: Running via a property company often means you hold cash in the company rather than distribution until extraction.

• Finance costs and margin squeeze: Lenders may charge higher rates or stricter terms for companies.

• Record-keeping and compliance: You’ll need to maintain proper statutory accounting, potentially higher compliance costs, and ensure you file corporation tax returns, Company House returns, etc.

• Exit flexibility: If you plan to sell or restructure in future, being in a company may bring greater flexibility (e.g. share sales) — but beware of double taxation (corporate and then personal).

How Trueman Brown can help with your property company matters

If you’re considering forming or running a property company, or want to review whether you should incorporate your existing property business, Trueman Brown can assist at every step. We offer:

• A full review of your rental portfolio and tax position under a property company structure

• Modelling of tax, cash flows, and extraction strategies

• Assistance with transfers, incorporation, accounting, and compliance

• Ongoing advisory support as tax rules change

To discuss your circumstances, you can contact us via mark@truemanbrown.co.uk or call 01708 397262. We’re here to help you make informed decisions and manage the administrative burden efficiently.

Frequently Asked Questions (FAQ)

1. What is a property company and why do landlords use one?
A property company is a limited company that holds and operates property assets. Landlords may use one to obtain the benefit of full interest deduction, mitigate higher income tax rates, and gain flexibility in profit extraction.

2. Are there downsides to forming a property company?
Yes. You may incur higher compliance costs, lose access to the capital gains annual exempt amount, face extra tax when extracting profits, and pay the SDLT 3% surcharge on property purchases.

3. Can I transfer existing rental properties into a property company without triggering tax?
In many cases, transferring properties will trigger stamp duty and capital gains tax liabilities — though in some scenarios incorporation relief may help defer gains. It depends on your situation.

4. Does a property company pay tax on gains from property sales?
Yes. Gains realised by a property company are taxed via corporation tax; there is no separate annual exempt amount available.

5. Has anything changed recently that affects property companies?
Yes — from April 2023, corporation tax for profits above £50,000 now rises up to 25 %, replacing the previous flat 19 % rate for larger profits. Also, residential property gain reporting must comply with the 60-day reporting and payment deadlines.

6. How can I decide if a property company is right for me?
You need to model your anticipated profits, cash flow, tax liabilities, extraction costs and exit plans. Speak with advisors who understand property taxation.

If you’d like help applying this to your portfolio, Trueman Brown is ready to assist — drop us an email (mark@truemanbrown.co.uk) or ring 01708 397262.