Corporation Tax for Property Companies: A Complete Landlord Guide
Running rental properties through a limited company has become increasingly popular since the Section 24 mortgage interest changes. But corporation tax for property companies works differently from trading companies.
This guide covers everything property company directors need to know about corporation tax, from allowable expenses to filing your CT600.
Why Use a Limited Company for Property?
Since April 2020, individual landlords can no longer deduct mortgage interest from rental income. They get a 20% tax credit instead. For higher-rate taxpayers, this significantly increases the tax bill.
Limited companies are different:
- Full mortgage interest deduction — 100% of mortgage interest is deductible against rental profits
- Corporation tax rates — 19-25% vs up to 45% income tax for individuals
- Retained profits — leave money in the company and pay no further tax until extraction
- Inheritance planning — shares in a company are easier to gift than individual properties
How Corporation Tax Works for Property Companies
Your company pays corporation tax on net rental profits:
Rental income (all rents received during the accounting period)
Minus allowable expenses (mortgage interest, repairs, management fees, etc.)
= Taxable profit
× Corporation tax rate (19% or 25%)
= Corporation tax due
Corporation Tax Rates (2024/25)
| Annual Profit | Rate |
|---|---|
| Up to £50,000 | 19% |
| £50,001 – £250,000 | 19-25% (marginal relief) |
| Over £250,000 | 25% |
Associated companies warning: If you own multiple property companies, the thresholds are divided between them. Two companies means the small profits threshold drops to £25,000 each.
Read more about associated companies →
Allowable Expenses for Property Companies
Mortgage Interest (Section 24 Doesn't Apply)
This is the big advantage. Your company can deduct 100% of mortgage interest as an expense. This includes:
- Residential mortgage interest
- Commercial mortgage interest
- Bridging loan interest
- Arrangement fees (spread over the loan term)
Property Repairs and Maintenance
Repairs that restore the property to its original condition are fully deductible:
- Replacing a broken boiler (like for like)
- Repainting and redecorating between tenants
- Fixing a leaking roof
- Replacing worn carpets with similar quality
- Plumbing and electrical repairs
Capital improvements are NOT deductible as expenses (but may qualify for capital allowances):
- Adding an extension
- Converting a loft
- Installing a new kitchen that's substantially better than what was there
Management and Professional Fees
- Letting agent fees (typically 8-15% of rent)
- Accountancy fees
- Legal fees for tenant disputes or lease renewals
- Property management software
- Landlord insurance
- Rent guarantee insurance
Running Costs
- Ground rent and service charges
- Council tax (when property is vacant)
- Utility bills (when property is vacant or between tenants)
- Building and contents insurance
- Gas safety certificates and EPC
- Travel costs for property inspections (45p per mile)
- Advertising for tenants
Wear and Tear / Furnished Properties
For furnished residential lettings, you can claim the Replacement of Domestic Items Relief:
- Deduct the cost of replacing furniture, appliances, kitchenware
- Only the replacement cost (not the initial purchase)
- Deduct the cost of the new item minus any proceeds from disposing of the old item
Capital Gains Within a Property Company
When your company sells a property, the gain is subject to corporation tax (not Capital Gains Tax):
Sale price
Minus purchase price
Minus purchase costs (stamp duty, legal fees)
Minus improvement costs (capital works)
= Chargeable gain
The gain is added to your company's trading profits for the year and taxed at the corporation tax rate (19-25%). This can be significantly cheaper than CGT at 24% for individuals (residential property rate).
Indexation Allowance
For companies, an indexation allowance was available to account for inflation on gains. However, this was frozen at December 2017 values and is being phased out. Check whether your property was held before January 2018.
Filing the CT600 for a Property Company
Your CT600 return for a property investment company includes:
Key Boxes
- Box 155 — Total turnover (gross rental income)
- Box 160 — Not applicable for investment companies (trading income)
- Box 165 — Gross profit (same as Box 155 for pure rental)
- Box 235 — Profits before other deductions and reliefs
- Box 300 — Profits before charges and group relief
Property Income vs Trading Income
Property investment companies report income as Schedule A income (property income), not trading income. This affects:
- Which CT600 boxes you fill in
- Whether you qualify for Entrepreneurs' Relief on disposal
- How losses are treated
Micro-Entity Accounts
Most small property companies qualify as micro-entities (FRS 105) if they meet two of three criteria:
- Turnover not more than £632,000
- Balance sheet total not more than £316,000
- Not more than 10 employees
Micro-entity accounts are simpler and cheaper to prepare. Taxpipe generates these automatically.
Common Mistakes Property Companies Make
1. Mixing Capital and Revenue Expenditure
A new kitchen that replaces a basic one with a luxury version is capital expenditure — not a repair. Get this wrong and HMRC will add the cost back to your profits.
2. Not Claiming Mortgage Interest
Some directors forget that the company (not them personally) pays the mortgage. Make sure all mortgage interest payments are recorded in the company accounts.
3. Ignoring Associated Companies
If you and your spouse each own a property company, they're likely associated — halving your small profits threshold from £50,000 to £25,000 each.
4. Missing the Filing Deadline
Your CT600 is due 12 months after your accounting period ends. But corporation tax payment is due 9 months and 1 day after. Miss either deadline and HMRC charges penalties.
What happens if you file late →
5. Not Keeping Proper Records
HMRC can request records going back 6 years. Keep:
- Rental agreements and tenancy records
- Bank statements showing rent received
- Receipts for all expenses
- Mortgage statements
- Property purchase/sale documents
Stamp Duty Land Tax (SDLT) for Companies
Companies pay a 3% surcharge on residential property purchases (on top of standard SDLT rates). For properties over £500,000, there's an additional 15% flat rate (ATED-related SDLT), though most genuine property rental businesses are exempt.
Should You Incorporate Your Properties?
If you already own properties personally, transferring them to a company triggers:
- Capital Gains Tax on the transfer (at market value)
- Stamp Duty Land Tax on the purchase by the company
- Mortgage complications — personal mortgages can't be transferred; you'll need commercial buy-to-let mortgages
For new purchases, buying through a company is usually more tax-efficient for higher-rate taxpayers. For existing portfolios, the upfront costs of incorporation often outweigh the benefits.
File Your Property Company's CT600
Taxpipe handles CT600 filing for property companies at just £59 per return. Our guided wizard walks you through every step — no accounting knowledge needed.