Running a Property Company: Corporation Tax, Dividends and Year-End Planning

A property company pays corporation tax at 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief between those thresholds, and deducts mortgage interest in full as a business expense. That single difference is why property company incorporation continues to attract landlords who have watched Section 24 erode the returns on personally held buy-to-let. Incorporating is not automatically the right answer, though: the transfer itself can trigger stamp duty land tax and capital gains tax, and lenders price company mortgages differently. Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice, runs this calculation for landlords every week, and the outcome varies far more by portfolio size and borrowing level than most landlords expect.

This article covers how a property company is taxed, what it costs to get property into one, how to extract profits efficiently, the year-end planning that keeps the structure working, and a decision framework by portfolio size.

Key Takeaways

• A UK property company pays corporation tax at 19% on profits up to £50,000, 25% on profits above £250,000, and an effective marginal rate of 26.5% on profits between those thresholds in 2026/27.
• A limited company deducts mortgage interest in full against rental profit, unlike an individual landlord, who receives only a 20% basic rate tax credit under Section 24.
• Transferring personally owned property into a limited company is a disposal at market value for capital gains tax and normally triggers stamp duty land tax at the higher residential rates, including the 5% surcharge.
• Dividend tax rates for 2026/27 are 10.75% at the ordinary rate, 35.75% at the upper rate and 39.35% at the additional rate, with a dividend allowance of £500.
• A property company must file a corporation tax return within 12 months of its year end and pay the tax within 9 months and 1 day of that year end.
• Incorporation relief under section 162 TCGA 1992 can defer the capital gains tax charge on incorporation, but only where the property activity amounts to a genuine business rather than passive investment.

How is a property company taxed in 2026/27?

A property company pays corporation tax on its rental profits after deducting all allowable costs, including the full mortgage interest bill. For the financial year running from 1 April 2026, the small profits rate is 19% on profits up to £50,000 and the main rate is 25% on profits above £250,000. Profits falling between the two thresholds attract marginal relief, producing an effective rate of 26.5% on that slice.

Those thresholds are divided by the number of associated companies. A landlord who already owns a trading company and then sets up a property company will find both thresholds halved, so the small profits band shrinks to £25,000 each. That single point catches out a large share of landlords who incorporate without advice.

The critical structural advantage is interest relief. An individual landlord letting residential property cannot deduct finance costs from rental profit and instead receives a basic rate tax credit worth 20% of the interest. A company deducts the interest in full before tax is calculated. For a highly geared portfolio, that difference can be worth thousands of pounds a year, which is exactly why landlord incorporation guide UK searches spike whenever interest rates move.

What does it cost to transfer property into a limited company?

Moving personally owned property into a limited company is treated as a sale at market value, which means capital gains tax and stamp duty land tax are both in scope even though no money changes hands. Ignoring these entry costs is the single most expensive mistake in property company incorporation.

Capital gains tax is charged on the difference between market value and original cost, at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers on residential property, after the annual exempt amount of £3,000. Incorporation relief under section 162 of the Taxation of Chargeable Gains Act 1992 can defer that gain into the shares received, but it applies only where the letting activity is run as a business, which HMRC guidance interprets as requiring substantial, active involvement rather than passive ownership.

Stamp duty land tax is payable by the company on the market value of each property, at the higher residential rates including the 5% additional dwelling surcharge. Where six or more dwellings transfer in a single transaction, the non-residential rates can be claimed instead, a meaningful saving for larger portfolios.

For the full picture on structuring the transfer, see our guide to property company incorporation.

How should a landlord extract profit from a property company?

Profit comes out of a property company through salary, dividends, director's loan repayments or pension contributions, and the right mix depends on what other income the shareholder already has. Dividends are the usual route for a landlord who has salaried employment elsewhere.

Where the director has no other employment income, Blue Tick's standard approach is one of two salary levels. A salary of £12,570 uses the full personal allowance and creates a larger corporation tax deduction, though it triggers employer's National Insurance above the secondary threshold. Alternatively, a salary set at the Lower Earnings Limit of £6,708 secures a qualifying year for the state pension with no income tax and no employee National Insurance, though the company still pays £256.20 of employer National Insurance above the £5,000 secondary threshold, and personal allowance is left unused. The first option usually wins where the company has profits to shelter; the second suits a landlord whose personal allowance is already absorbed by employment or pension income.

Dividends are then taxed at 10.75%, 35.75% or 39.35% in 2026/27 depending on the shareholder's band, after the £500 dividend allowance. Repaying a director's loan created on incorporation is tax free in the shareholder's hands and is often the most efficient extraction route in the early years.

Worked example: a four-property portfolio inside a company

Consider a landlord with four rental properties generating £64,000 in rent, £24,000 of mortgage interest and £8,000 of other allowable costs, who also earns £60,000 from employment.

Held personally, the taxable rental profit is £56,000 because the interest is not deductible. Added to employment income, that profit sits in the higher rate band and attracts income tax of £22,400 at 40%. The Section 24 credit returns 20% of the £24,000 interest, or £4,800, leaving a net tax bill of £17,600 on real economic profit of £32,000, an effective rate of 55%.

Held in a limited company, the taxable profit is £32,000 after deducting the interest in full. With no associated companies, corporation tax at 19% is £6,080, leaving £25,920 of retained profit. If the landlord leaves that profit in the company to fund the next deposit, the annual saving is £11,520. If the full amount is drawn as a dividend, upper rate tax of 35.75% on £25,420 adds £9,088, giving a combined tax cost of £15,168 and a smaller but still real saving of £2,432.

The lesson is straightforward: a limited company buy-to-let structure rewards landlords who reinvest, and rewards them far less if every pound is drawn out immediately.

What year-end planning should a property company do?

A property company should review its position two to three months before the accounting year end, while there is still time to act. Once the year end passes, most planning opportunities close permanently.

The main items to review are the timing of repairs and refurbishment spend, which is deductible when incurred; employer pension contributions, which are deductible in the accounting period they are paid and are often the most efficient way to extract value; capital allowances on qualifying plant and machinery in communal areas; and the level of directors' remuneration set before the year closes.

Corporation tax is due 9 months and 1 day after the year end, while the CT600 return is not due until 12 months after it, so the payment comes first. A company holding residential property worth more than £500,000 may also need to file an Annual Tax on Enveloped Dwellings return by 30 April each year, even where relief for letting to third parties reduces the charge to nil.

Which landlords should actually incorporate?

Incorporation generally makes sense for landlords with substantial mortgage interest, higher rate income and an intention to reinvest profits rather than spend them. It rarely makes sense for a landlord with one or two unencumbered properties and modest income.

As a working framework: portfolios of one or two properties with little or no borrowing usually stay personally held, because the SDLT and CGT entry costs take too long to recover. Portfolios of three to five geared properties held by a higher rate taxpayer sit in genuinely borderline territory, where the payback period on entry costs is typically four to eight years and the decision turns on how long the landlord intends to hold. Portfolios of six or more properties, particularly where incorporation relief and the six-dwelling SDLT rule are both available, tend to favour a company clearly.

Mortgage availability is the practical constraint that decides many cases. Limited company buy-to-let products are widely available but usually carry higher arrangement fees and require personal guarantees, so the true comparison includes finance costs, not tax alone.

Frequently Asked Questions

Do I pay stamp duty when moving my own property into my limited company?

Yes. Transferring property from personal ownership into a limited company is a market value transaction for stamp duty land tax purposes, and the company pays SDLT at the higher residential rates including the 5% additional dwelling surcharge. Where six or more dwellings transfer in a single transaction, the non-residential rates can be claimed instead, which usually reduces the bill substantially.

Can I avoid capital gains tax when incorporating my property portfolio?

Incorporation relief under section 162 TCGA 1992 defers capital gains tax on incorporation by rolling the gain into the base cost of the shares received. The relief applies only where the property letting is run as a genuine business with active management, not passive investment. HMRC scrutinises these claims closely, so evidence of the time and activity involved is essential.

How much corporation tax does a property company pay in 2026/27?

A UK property company pays corporation tax at 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief creating an effective 26.5% rate on profits between the two. These thresholds are shared between associated companies, so a landlord who also owns a trading company will see both limits reduced proportionately.

Is it better to keep profit in a property company or take dividends?

Retaining profit in a property company is more tax efficient than extracting it, because only corporation tax applies at 19% to 25%. Drawing the profit as a dividend adds a further 10.75%, 35.75% or 39.35% in 2026/27 depending on the shareholder's tax band. Landlords who reinvest into further property gain the most from a company structure.

When does a property company have to pay its corporation tax?

A property company must pay corporation tax within 9 months and 1 day of the end of its accounting period, and file its CT600 return within 12 months of that date. The payment deadline therefore falls before the filing deadline, so the tax figure needs to be estimated and settled ahead of the return being submitted.

How Blue Tick Can Help

Blue Tick Accountants models the full incorporation decision for landlords, including SDLT, capital gains tax, incorporation relief eligibility and the payback period on entry costs, before any property moves. For landlords already operating through a company, Blue Tick handles the corporation tax return, annual accounts, ATED filings and the year-end extraction planning that keeps the structure working. Head to our website and book a meeting now.

Conclusion

Incorporating a property portfolio is a decision about the next decade, not the next tax year. The tax saving is real for geared, higher rate landlords who reinvest, but the SDLT and capital gains tax entry costs mean the arithmetic only works over a long enough holding period. Run the numbers on your own portfolio before assuming the structure suits you, and review your company's position two to three months before each year end while planning is still possible.

About the Author

This guide was written by Leon, founder of Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that helps landlords, limited company owners and the self-employed across the UK. Leon advises on property company incorporation, corporation tax and year-end planning. It was last reviewed for the 2026/27 tax year.

This article is intended for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are subject to change and their application will depend on your individual circumstances. You should always seek advice from a qualified professional before taking action. Blue Tick Accountants accepts no liability for decisions made on the basis of this content.

Related reading: Is a Property Company Right for Your Portfolio? A Decision Checklist.

Related reading: Property Company vs Personal Ownership: A Full Tax Comparison.