Corporation Tax for Property Companies

A property company is just a landlord that HMRC treats as a business in its own right: it pays Corporation Tax on real profit after full interest, then you decide how and when to take that money out.

"This guide provides general information about UK landlord tax obligations. It is not financial or legal advice. Tax treatment depends on your individual circumstances and may change. Consider consulting a qualified accountant or solicitor for advice specific to your situation."

1. Corporation Tax rates, thresholds and associated companies

Rates in 2025-26 and 2026-27

Since 1 April 2023, rates have been:

• 19% small profits rate on profits up to GBP 50,000.
• 25% main rate on profits over GBP 250,000.
• Marginal relief between GBP 50,000 and GBP 250,000, giving an effective rate between 19% and 25%.

Example (no associated companies):

• Profits GBP 120,000.
• Tax at 25% = 30,000.
• Marginal relief formula knocks this down by GBP 1,950, giving an effective rate of approx 21.4%.

Associated company rules

If you control more than one company, the thresholds are divided.

Two associated companies (eg you and your spouse each own a property company, but HMRC treat you as connected):

• Small profits threshold effectively GBP 25,000 each.
• Upper threshold GBP 125,000 each.

With five associated companies, the GBP 50,000 and GBP 250,000 thresholds shrink to GBP 10,000 and GBP 50,000. If you and your partner run one trading company and one property company each, you can hit the 25% rate at much lower profit levels than you expect.

2. How property company profits are calculated

The big difference versus personal ownership: no Section 24.

Under CTA 2009/2010 and HMRC's company manuals:

Rental profit for a company = rental income minus all allowable expenses, including:

• Repairs and maintenance.
• Insurance, service charges.
• Agent and management fees.
• Full mortgage interest and other finance costs (subject to the usual wholly-and-exclusively test).

So where an individual landlord uses ITTOIA 2005 and Section 24 to get only a 20% credit for interest, a company just deducts interest in full before calculating Corporation Tax.

This is why higher-rate landlords at 50-75% LTV often look at companies: the tax calculation is on a truer profit figure.

3. Payment deadlines and CT600 filing

Standard small/medium property company timeline (12-month year):

Corporation Tax payment:

• Due 9 months and 1 day after the end of the accounting period for small and most medium companies.
• Example: year ended 31 March 2026 = tax due by 1 January 2027.

CT600 return filing:

• Due 12 months after the period end (31 March 2027 in the example).

Quarterly instalments:

• Large companies (broadly profits over GBP 1.5m, scaled down if there are associated companies) pay Corporation Tax in quarterly instalments starting in-year, not 9 months after.
• Most small property SPVs stay outside quarterly instalments, but bigger groups can get caught more quickly than expected once associated companies are counted.

4. Extracting money: salary, dividends, loans

Getting cash out is where many forum-level comparisons fall over. You have three main tools, all interacting with ITTOIA, ITEPA and dividend rules.

Salary

• The company can pay you a director's salary.
• Up to the personal allowance GBP 12,570 is tax-free, but you need to watch NIC thresholds:
• Employee NIC kicks in above the Primary Threshold.
• Employer NIC above the Secondary Threshold.
• Salary is an allowable expense for the company, reducing Corporation Tax.
• For many landlords, accountants suggest a small salary (often at or around the NIC thresholds) plus dividends.

Dividends

Dividends are paid from post-tax profits.

Dividend tax allowance in 2025-26: GBP 500.

Dividend tax rates (above GBP 500 allowance):

• 2025-26: 8.75% basic, 33.75% higher, 39.35% additional.
• From April 2026 the ordinary and upper rates increase by 2 points to 10.75% and 35.75%, additional stays 39.35%.

So for 2025-26:

• If your other income keeps you in basic rate, dividends above GBP 500 are taxed at 8.75%.
• In higher rate, 33.75%.

In 2026-27, those become 10.75% and 35.75% respectively.

Director's loan / s455

If you take money from the company without salary or dividends (ie overdraw your director's loan account):

• If still outstanding 9 months after year end, the company owes a Section 455 tax charge at 33.75% of the outstanding loan to participators.
• That s455 tax is refunded when the loan is repaid, but often years later, and HMRC charge interest in the meantime.
• You can also get benefit-in-kind issues if the loan exceeds certain thresholds and is interest-free.

Bottom line: using loans as a long-term extraction strategy is usually worse than just paying dividends properly.

5. Personal vs company: what the real after-tax position looks like

High-level comparison for an individual in higher-rate 40% vs a company at 25% Corporation Tax, ignoring personal allowance, NIC and marginal-relief fine detail. Figures are annual true rental profit after all expenses and full interest.

Scenario 1: GBP 20,000 rental profit

Personal (higher-rate individual, Section 24 already priced in):

• Profit taxed at 40% = GBP 8,000.
• Net after tax = GBP 12,000.

Company:

• Corporation Tax at 25% = GBP 5,000.
• Post-tax profit = GBP 15,000.

If you retain all profits:

• Company leaves you GBP 3,000 more inside the structure to reinvest than personal ownership.

If you extract all as dividends in higher-rate 2025-26:

• Dividend tax on 15,000 (ignoring GBP 500 allowance) at 33.75% = approx GBP 5,062.
• Combined tax: 5,000 + 5,062 = approx GBP 10,062 on 20,000 = 50.3% effective.
• That can be worse than simply being taxed personally at 40%, especially once you include compliance costs.

If you are basic-rate on the dividends (8.75% in 2025-26), company + dividend can still beat personal higher-rate.

Scenario 2: GBP 40,000 and 80,000 profit

The pattern:

• If you need the cash personally, company + dividends tends to only win big if:
• You keep yourself in basic-rate on dividends, or
• You can split with a lower-earning spouse.
• If you can leave most profits in the company, then:
• Tax at 19-25% inside the company vs 40-45% personally plus Section 24 makes a huge difference over time.

This is why the "company is always better" line on forums is misleading. For a higher-rate taxpayer who spends all the rental profit personally, the extraction tax often kills much of the benefit. For someone who can retain and reinvest in the company for 10-20 years, it is a different story.

6. Common property company tax mistakes and forum myths

Mistakes

Treating the company bank account as your own Regular personal spending directly from the company with no salary/dividend paperwork leads to overdrawn loan accounts and s455 charges.

Ignoring associated companies Running multiple companies (trading, property, another SPV) and assuming each gets its own GBP 50k/250k thresholds. In reality, thresholds are split, pushing you into higher effective CT rates faster.

Not planning for quarterly instalments Growing to profits that trigger quarterly Corporation Tax and being surprised by in-year payments.

Forgetting personal tax on dividends Many landlords budget assuming "25% CT then the rest is mine". In reality, dividends at 33.75-35.75% on top can push combined tax into the 40-50% range if you extract fully.

Forum myths

"Companies do not pay tax on mortgage interest." Wrong: they do, but as a normal expense under CTA 2009, not via Section 24. Interest reduces profit before tax, exactly as you would expect in any business.

"Putting properties in a company automatically saves tax." Wrong: it can, but only after factoring in:

• Corporation Tax vs income tax.
• Dividend tax vs extraction needs.
• CGT and SDLT if you are transferring existing properties.

"You and your spouse can each have a property company and keep the full GBP 50k small-profits band each." Wrong: associated company rules mean thresholds are shared where you effectively control both structures.

"You can just leave profits in a company and never worry about personal tax." You can delay personal tax, which is valuable, but extracting later still triggers dividend or other taxes. Delay is good planning; it is not avoidance.

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