Can I Buy or Sell a Residential Property Through a Limited Company

Key Points

● A limited company can legally purchase and own residential property in the UK, and an increasing number of property investors use this structure to manage rental portfolios.

● Companies always pay the 5% Stamp Duty Land Tax surcharge on residential purchases, and those buying property worth more than £500,000 are subject to a higher flat rate of 17% under the corporate envelope rules.

● Rental profits held in a limited company are subject to Corporation Tax at 19–25%, and companies can deduct mortgage interest in full, unlike individual landlords restricted by Section 24 of the Finance (No. 2) Act 2015.

● When a company sells a residential property, the gain is subject to Corporation Tax rather than Capital Gains Tax; shareholders who then extract those profits face a further layer of tax through dividends.

● Properties worth more than £500,000 held in a company may also trigger an annual charge under the Annual Tax on Enveloped Dwellings (ATED) regime unless a relief applies.

A limited company can buy and sell residential property in the UK. The company becomes the legal owner, the title at HM Land Registry is registered in the company's name, and all financial activity flows through the business rather than through you personally. A Commercial Property Solicitor can advise you on all the legal matters relating to the sale and purchase.

The structure is increasingly common among landlords and investors, particularly following the changes to mortgage interest relief that took effect in April 2020. Understanding what buying or selling through a company actually involves — legally, financially, and practically, is essential before making the decision.

The law in England and Wales

A limited company is a separate legal entity from its directors and shareholders. When it purchases property, that property forms part of the company's assets. This separation is fundamental: the company owns the bricks and mortar, not the individual.

The conveyancing process is broadly similar to a standard residential purchase. Contracts are exchanged, searches are carried out, and the title is transferred and registered at HM Land Registry in the company's name. However, several additional steps apply.

Before proceeding, the company must be incorporated at Companies House. Your conveyancing solicitor will need to verify the company's details, review the articles of association to confirm that the company is authorised to hold property, and carry out identity checks on all directors and on any shareholders holding more than 25% of the company's share capital. Where a mortgage is involved, most lenders will also require the company to be registered under a property-specific Standard Industrial Classification (SIC) code, typically 68100 (buying and selling of own real estate) or 68209 (letting and operating of own or leased real estate), and will insist that the directors provide a personal guarantee for the loan.

That personal guarantee is an important point. Most limited company buy-to-let mortgages require directors to sign a personal guarantee, meaning that even though the mortgage sits with the company, you are personally liable if the company defaults. Lenders will also carry out independent legal advice checks to confirm that directors understand the implications before the mortgage is advanced. Further information on lender requirements can be found on the UK Finance website.

Tax on Buying: Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) is the area where buying through a company becomes more expensive immediately. Under the rules set out in the Finance Act 2003 and subsequent amendments, companies always pay the 5% additional dwellings surcharge on residential purchases, regardless of how many properties they already own. A company buying its very first residential property pays the same surcharge as one buying its twentieth.

From 31st October 2024, the additional dwellings surcharge increased from 3% to 5% above standard rates, following the Autumn Budget announcement. Standard residential SDLT rates (from 1st April 2025) run at 0% up to £125,000, 2% on the portion between £125,001 and £250,000, 5% on the portion between £250,001 and £925,000, 10% on the portion between £925,001 and £1.5 million, and 12% above that. Add 5% to each band for companies.

For residential property purchases above £500,000, a separate, higher flat rate applies to companies and other non-natural persons. From 31st October 2024, this corporate envelope rate stands at 17%. It was designed to discourage the holding of high-value residential properties in corporate structures, and it makes buying expensive homes through companies considerably more costly than buying them personally.

The Annual Tax on Enveloped Dwellings

Any company that owns a UK residential property worth more than £500,000 must consider the Annual Tax on Enveloped Dwellings (ATED). Introduced under the Finance Act 2013 and subsequently extended, ATED is an annual charge that applies to residential properties held within corporate wrappers.

The charge is banded by property value. For the 2025–26 tax year, the annual charge ranges from £4,450 for properties worth between £500,001 and £1 million to £292,350 for properties worth more than £20 million. From 1st April 2026 to 31st March 2027, those figures increase to £4,600 and £303,450 respectively. ATED returns must be filed with HMRC by 30th April each year, and late filing penalties can reach £1,600 per return.

A number of reliefs exist. Companies that let property on a commercial basis to unconnected third parties can claim letting relief, which effectively removes the charge. In contrast, the property is being used for genuine rental purposes. Other reliefs cover property developers and property traders. It is important to claim these reliefs correctly and file the return even where no tax is due, otherwise penalties will follow.

Corporation Tax, Rental Income and Section 24

One of the principal reasons landlords have moved into limited company structures is the restriction on mortgage interest relief introduced by Section 24 of the Finance (No. 2) Act 2015. For individual landlords, mortgage interest is no longer deductible from rental income before calculating tax due. Instead, they receive only a 20% basic rate tax credit, regardless of their actual tax band. A higher-rate taxpayer who previously deducted all their mortgage interest now pays significantly more tax on the same profit.

Limited companies are not subject to Section 24. A company can deduct mortgage interest as a business expense against rental income in full, and the remaining profit is taxed at the Corporation Tax rate of 19% on profits up to £50,000, rising to a maximum of 25% for profits above £250,000. For higher-rate taxpayers with mortgaged property portfolios, this difference can be substantial.

There is a catch, however. When profits are extracted from the company, the shareholder pays further tax. Dividends above the £500 annual allowance attract dividend tax at 8.75% for basic-rate taxpayers, 33.75% at the higher rate, and 39.35% at the additional rate. The headline Corporation Tax saving can be significantly eroded once profits are drawn out personally.

Selling a Property Held by a Company

When a company sells a residential property, the gain is subject to Corporation Tax. The main rate is currently 25% for profits above £250,000. By contrast, an individual selling a residential investment property pays Capital Gains Tax at 18% (basic rate) or 24% (higher rate), and benefits from the annual CGT exemption of £3,000 for the 2025–26 tax year.

There is no equivalent annual exemption for companies. Every pound of gain on a sale is taxable. A company that holds properties over many years and then disposes of them will crystallise a Corporation Tax liability, and the net proceeds, once tax has been paid, can only be extracted by the shareholders as dividends, triggering yet further personal tax. This double layer of taxation is one of the most significant disadvantages of corporate property ownership, particularly for those who intend eventually to sell and pocket the proceeds.

This is why selling the company's shares, rather than the underlying property, is sometimes considered a way to avoid triggering SDLT or Corporation Tax on a disposal. In practice, buyers of residential investment properties are frequently reluctant to acquire company shares because they then inherit all the company's liabilities and potential tax exposure. Share sales are considerably less common than property sales in this context.

Transferring Existing Properties into a Company

Landlords who currently hold properties personally and wish to transfer them into a limited company face an immediate tax hurdle. HMRC treats any transfer between a person and their own company as a transaction at market value, regardless of the actual consideration paid. CGT will be due on any gain since the original purchase, and SDLT will apply to the company acquisition at the corporate rates described above.

Incorporation relief under Section 162 of the Taxation of Chargeable Gains Act 1992 can defer the CGT liability if the property activities qualify as a business transferred as a going concern in exchange for shares. The leading case on this point is Ramsay v HMRC [2013] UKUT 0226 (TCC), in which the Upper Tribunal held that a landlord who devoted significant time to managing her portfolio, substantially more than a passive investor would, could satisfy the business test. Most landlords with modest portfolios and limited active involvement will not meet this threshold.

SDLT relief is not available simply by incorporating a sole trader's rental business. Where a genuine property-letting partnership has existed for a sustained period, and the partnership is then incorporated, a limited form of SDLT relief may apply. Still, the arrangements must be genuine and commercially driven. HMRC has issued guidance targeting artificial schemes that seek to manufacture partnership status solely for tax purposes.

Practical Points for Buyers and Sellers

Anyone considering using a company structure for residential property should take the following into account:

● The company must be incorporated before contracts are exchanged. Attempting to retroactively turn a personal purchase into a company purchase after the fact creates significant complications.

● Mortgage options for limited companies are more restricted than personal mortgages. Rates are typically 0.5% to 1% higher, and lenders may impose minimum income requirements on directors.

● Annual accounts must be filed at Companies House and Corporation Tax returns submitted to HMRC, even if the company is dormant. Accountancy costs are therefore ongoing.

● If you intend to live in the property personally, company ownership is unsuitable. The benefit in kind rules mean the company pays no principal private residence relief on disposal, and you pay income tax or National Insurance on the deemed benefit of occupation.

● For inheritance tax planning, shares in a property-holding company can in some circumstances, be structured more flexibly than directly held land, though specific advice is always needed.

● Planning permission, licences, and regulatory compliance obligations (such as energy performance certificates and gas safety certificates) remain the same regardless of whether the owner is an individual or a company.

Frequently Asked Questions

Does a limited company pay the SDLT surcharge on its first property purchase?

Yes, a limited company always pays the 5% additional dwellings surcharge on the purchase of residential property, even if it is the company's first and only purchase. There is no first-purchase exemption for corporate buyers.

Can I transfer my buy-to-let property into a company without paying CGT or SDLT?

Not straightforwardly. HMRC treats the transfer as a market-value sale, so CGT and SDLT will ordinarily apply. Incorporation relief under Section 162 of the Taxation of Chargeable Gains Act 1992 may defer the CGT element if the activities amount to a business, but this is a high threshold, and professional advice is essential before taking any steps.

Is ATED payable on all company-owned residential properties?

No, ATED applies only to properties worth more than £500,000. Properties below that value are entirely outside the regime. Where a property does exceed the threshold but is genuinely let out commercially to an unconnected third party, a letting relief can be claimed to remove the annual charge, provided the correct return is filed with HMRC on time.

What happens when the company sells a residential property?

The gain is charged to Corporation Tax at the company level. Currently, that is 25% on profits above £250,000. The company has no equivalent to the individual's annual CGT exemption. Any net proceeds extracted as dividends are subject to further dividend tax in the hands of shareholders, meaning the effective overall rate on a sale can exceed what an individual would pay.

Do I need a separate solicitor for the limited company mortgage?

Yes, where a lender requires directors to provide a personal guarantee, those directors must take independent legal advice from a Commercial Property Solicitor who is entirely separate from the transaction. The solicitor confirming that advice to the lender is a standard lender requirement, and the conveyancer acting on the property purchase cannot ordinarily fulfil that role.

Please note that this article does not constitute legal advice.

Author – Tahira Khan