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7 reasons why you should invest in property through a limited company

Updated: Apr 4, 2023

You may or may not be aware that a limited company is legally recognised as being a separate entity from its owner, which means that when it comes to the limited company’s assets, it is the company itself that owns them.

When it comes to investing in property, using a limited company to do so can have many benefits – and not only monetary ones.

It is true that the tax-related benefits are usually going to be better when using a limited company to invest in property rather than buying property personally, but there are more practical reasons to take this route, too.

1. There is no mortgage interest relief restriction for limited companies

Although the amount of tax relief accessible to individual property owners is being cut back, any interest paid on a mortgage to purchase property through a limited company is fully tax deductible. This means that it can often work out more tax efficient to purchase an investment property through a limited company.

It is also worth noting that from April 2020, landlords will no longer be able to deduct mortgage interest from their rental profits, which will affect their income tax bills significantly. There is less than a year to go until this change comes into play, so if you don’t already have a limited company set up for your investment properties, it is worth seriously considering going this route.

2. Limited companies have a significantly lower tax rate than individuals who pay income tax

A limited company pays corporation tax rather than income tax, and the latter of which is currently paid at 19% of the company’s profits, compared to income tax, which can be up to 45% for high earners. From 1st April 2020, corporation tax is set to increase to 25% of the company’s profits, but this is still far more tax efficient compared to sole trader when it comes to property ownership.

Obviously, you will have to pay income tax when accessing the funds from your limited company – but it is very likely that you will be better off from a tax-efficiency point of view doing this than having to pay high levels of income tax, such as 45%.

3. Multiple shareholders

Sharing company profits between multiple shareholders, whether by way of salary or dividends, means that you can take advantage of using multiple individual tax allowances e.g. you and your spouse, or your children (if they are over the age of 16). You can each use as much of your income tax allowance as you want, and you can be flexible with this approach; you don’t have to take the same amount of profit as each other, and you can vary the frequency of sharing out the profits, too.

It is worth noting that it is very simple process to onboard new shareholders as well to a company structure (especially if you have an accountant to do it for you!), therefore allowing the profits to be distributed amongst even more people if you so wish.

4. You can rely on the fact that creditors do not have access to your personal assets

Particularly useful when buying land and then developing property, relying on limited liability protection rather than personal liability can come in very handy, especially in the case of a recession

Creditors only have access to the company’s assets, so if the company’s financial situation was to deteriorate, the people behind the company i.e. directors and shareholders will be safe from creditors. Be aware, though, that if you are a first-time landlord, your lender may insist that you put a personal guarantee behind a mortgage, which can mean that creditors can access personal assets if the company’s financial situation were to deteriorate. More seasoned landlords with a good track record, however, can often escape being asked to provide a personal guarantee.

5. You can retain the company profits and reinvest them without paying more tax

When you own a property in your personal name, you need to pay tax on any profit you receive from that property, even if you are intending on using the profits to reinvest in more property. With a limited company, all of your profits (after corporation tax, which, as mentioned before, is lower than income tax) can be kept in the company and used to reinvest, if that is the route, you want to go down.

6. Cheap stamp duty when selling shares of a company containing properties

When a company owns a property and it is time to sell up, there is an option to sell shares of the property rather than the property itself. This can be advantageous to the buyer, as they only have to pay small percentage of stamp duty on such a transaction. Stamp duty for personally owned properties can be as high as 15% - so this one really is a no-brainer!

7. Access to better loans when looking to grow the business

When growing your property portfolio, you can use this to your advantage when approaching lenders for loans. By showing that you have a strong portfolio of investment properties and a well-managed limited company behind it, creditors are more likely to offer good rates when applying for loans.

By using one limited company for all your properties, you will have the ability to see the performance of your entire investment portfolio to enable you to work out which properties are making and losing money, which can, in turn be provided to investors or creditors to help support any requests for financial backing.

Next steps

While it seems like a no-brainer to invest in property via a limited company, the cost, time and effort associated with running a limited company can often seem like a lot of effort – sometimes overshadowing the potential tax-related benefits associated with this method. Your solicitor, conveyancer and accountant, for example, may charge you more because they have to deal with the further work involved with dealing with the limited company in addition to yourself.

If you would like tailored advice about using your limited company to invest in property, please do get in touch – book a call with Cavelle Batchelor, or drop him an email,

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