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Tax
Corporation Tax
Tax paid by limited companies on their profits, currently 19% for profits under £50,000 and 25% for profits over £250,000.
Corporation Tax is the tax paid by UK limited companies on their taxable profits. For property investors who hold BTL properties through a Special Purpose Vehicle (SPV) limited company, corporation tax replaces personal income tax on rental profits.
Current Rates (2025/26)
| Annual profits | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 – £250,000 | Marginal rate (26.5% effective) |
| Over £250,000 | 25% (main rate) |
Why Landlords Use Limited Companies
The main advantage is that mortgage interest remains fully deductible as a business expense within a company structure. Unlike individual landlords affected by Section 24, a company can offset 100% of its finance costs against profits before tax is calculated.
For a higher-rate taxpayer with significant mortgage costs, this can result in substantially lower tax bills.
Key Considerations
- Extracting profits: Money left in the company is taxed at corporation tax rates, but taking it out as dividends or salary triggers additional personal tax
- Mortgage availability: BTL mortgages for SPV companies are available but typically at slightly higher rates
- CGT vs Corporation Tax on sale: Companies pay corporation tax (not CGT) on disposals, and gains cannot benefit from the personal CGT annual exemption
- Setup and running costs: Company accounts, annual returns, and accountancy fees add £500–£1,500/year in overhead