Corporation Tax on Rental Income: CT600 Guide

Corporation Tax on Rental Income: CT600 Guide

Your limited company owns a property — maybe a buy-to-let flat, a commercial unit, or the office building the business operates from. The rental income it generates is taxable, but the corporation tax treatment of property income has its own rules, its own CT600 boxes, and its own pitfalls.

This guide covers everything you need to know about how rental income is taxed inside a limited company, what you can deduct, how to report it on your CT600, and when holding property through a company makes tax sense.

Is Rental Income Taxable for a Limited Company?

Yes. All rental income received by a UK limited company is subject to corporation tax. It doesn't matter whether the property is residential or commercial, UK or overseas — if your company receives rent, it's taxable.

However, rental income is treated differently from trading income. For most companies, property rental is a property business rather than a trade, and it follows specific rules under Part 4 of the Corporation Tax Act 2009 (CTA 2009).

Trading income vs property income

Exception: If your company's sole trade is property development (buying, renovating, and selling properties), the income may be trading income rather than property income. But if you simply hold property and collect rent, it's property income.

How Rental Income Is Taxed: Corporation Tax Rates

Rental income is taxed at the same corporation tax rates as other profits. These rates have applied since 1 April 2023 and remain in place for 2025/26:

Within the marginal relief band, each extra pound of profit is effectively taxed at 26.5% — that's the marginal rate on the slice of profits above £50,000, not the effective rate on your total profits (which runs from 19% at the bottom of the band to 25% at the top).

Rental income is added to trading profits to determine total taxable profits. If your company has £40,000 in trading profits and £15,000 in rental income, total profits are £55,000 — pushing you into the marginal relief band.

These thresholds are divided by the number of associated companies plus one, which is especially relevant for property investors who may have multiple companies.

Allowable Deductions Against Rental Income

Your company can deduct expenses that are wholly and exclusively incurred for the property business. These reduce your taxable rental profit:

Direct property expenses

The mortgage interest advantage

This is the biggest tax difference between holding property personally vs through a company. Individual landlords have been subject to the Section 24 restriction since April 2020 — mortgage interest is no longer deductible against rental income; instead, they receive a basic rate (20%) tax credit.

Companies face no such restriction. A limited company can deduct 100% of mortgage interest against rental profits, potentially saving thousands per year compared to personal ownership.

Example: Personal vs company mortgage interest

The company saves £4,920 in this scenario. This is the main reason many landlords have incorporated their property portfolios.

Repairs vs improvements

This distinction trips up many landlords:

• Repair (deductible): Replacing a broken boiler with a similar model, repainting walls, fixing a roof leak
• Improvement (not immediately deductible): Extending a property, adding a conservatory, upgrading single-glazed to double-glazed windows

Improvements are capital expenditure and may qualify for capital allowances (for commercial property fixtures) or are added to the base cost when calculating any future capital gain on the property.

Replacement of domestic items relief

For furnished residential properties, the replacement of domestic items relief allows companies to deduct the cost of replacing furniture, appliances, and kitchenware. The deduction is for the cost of the replacement item (not the original) minus the proceeds from selling the old item.

Where to Report Rental Income on Your CT600

The key boxes

• Box 190 — Income from a property business (net rental profit after deductible expenses). HMRC's guidance for this box explicitly covers "income from land and buildings outside the UK" — so both UK and overseas rental income go here.
• Box 170 — Bank, building society or other interest, and non-trading loan relationship profits. This is for interest the company receives. Mortgage interest your company pays on a rental property is a property business expense deducted before you arrive at the Box 190 figure — it does not go in Box 170.
• Box 250 — UK property business losses of this or a previous accounting period being set against profits (see the losses section below).

Property income computation

Before entering figures on your CT600, you need to prepare a property income computation showing:

1. Gross rents receivable — total rent for the period (not cash received — use the accruals basis)
2. Less: allowable expenses — all deductible costs listed above
3. Equals: property business profit (or loss) — this figure goes in Box 190

This computation forms part of your company's accounts and must be included in the iXBRL accounts filed with the CT600.

Property Losses

If your allowable expenses exceed rental income, your company has a property business loss. Companies get more generous in-year relief for property losses than individual landlords do — but the rules still differ from trading losses:

Key rules (CTA 2010 s.62)

• Automatic set-off against total profits — a UK property business loss is first set against the company's total profits of the same accounting period, including trading profits and chargeable gains. This happens automatically; no claim is needed.
• Excess carried forward — any unused loss carries forward to the next accounting period and is set against future total profits, provided the company continues to carry on the property business.
• No carry-back — unlike trading losses, property losses cannot be carried back to an earlier period.
• Group relief — property business losses can be surrendered to group companies.

On the CT600, losses being set against profits go in Box 250. Box 805 records the UK property business loss arising in the current accounting period only (HMRC's guidance explicitly excludes amounts carried forward from a previous period); the carried-forward balance is tracked in your tax computations, not in a separate CT600 box.

Example

Your company has £30,000 in trading profits and a £10,000 property business loss. The property loss is set against the trading profits automatically, leaving £20,000 of taxable profits for the period. If the loss had been bigger than total profits, the excess would carry forward against future total profits.

The main restriction compared with trading losses is the lack of carry-back — you can't use a property loss to reclaim corporation tax paid in an earlier year.

Multiple Properties: One Property Business

If your company owns multiple rental properties, they are all treated as a single property business for tax purposes. This means:

• All rents are pooled together
• All expenses are pooled together
• You get one overall profit or loss figure
• A profitable property and a loss-making property offset each other automatically

You don't report each property separately on the CT600. The single combined figure goes in Box 190.

UK and overseas properties: two separate businesses

However, UK and overseas property income are treated as two separate property businesses. You cannot offset a loss on an overseas property against profits from a UK property (or vice versa). Both figures are included within Box 190 on the CT600 (HMRC's guidance for Box 190 covers income from both UK and overseas land and buildings), but your property income computation should show them separately.

Stamp Duty Land Tax (SDLT) for Company Purchases

Companies buying residential property face a higher SDLT bill than individuals:

• 5% surcharge applies on all residential property purchases by companies (on top of standard rates) — this was increased from 3% on 31 October 2024
• For dwellings over £500,000 purchased by a company, the flat 17% rate can apply under the rules linked to the Annual Tax on Enveloped Dwellings (ATED) — though most genuine rental businesses qualify for relief from this

The higher SDLT cost is a significant consideration when deciding whether to purchase property through a company.

Capital Gains When the Company Sells Property

When your company eventually sells a rental property, any gain is subject to corporation tax (not capital gains tax — companies don't pay CGT).

• Gain calculation: Proceeds minus original cost minus incidental costs of sale minus allowable enhancement expenditure
• Indexation allowance: Frozen at December 2017 values. This provides relief for inflation up to that date
• Corporation tax rate: The gain is added to other profits and taxed at the company's marginal rate (19%, 25%, or the marginal relief rate)
• Extracting the proceeds: Once the company has paid corporation tax on the gain, extracting the net proceeds as a dividend triggers additional personal tax. This "double tax" effect is a key disadvantage of holding property in a company

When Does a Property Company Make Sense?

Advantages of holding property in a company

• Full mortgage interest relief — no Section 24 restriction
• Lower tax rate — 19% or 25% vs up to 45% personal income tax
• Retained profits — reinvest rental profits without paying personal tax until dividends are drawn
• Succession planning — shares in a company can be gifted or transferred more easily than direct property interests
• Multiple properties — the benefits compound with larger portfolios

Disadvantages

• SDLT surcharge — 5% extra on purchase
• Double taxation on sale — corporation tax on the gain, then personal tax on extraction
• Running costs — company accounts, CT600 filing, Companies House fees
• Mortgage availability — corporate mortgages may have higher rates and stricter criteria
• No CGT annual exempt amount — companies don't get the individual CGT allowance (currently £3,000)

The general rule of thumb

A property company typically makes sense if you:

• Are a higher or additional rate taxpayer
• Have significant mortgage interest costs
• Plan to hold properties long-term (reducing the double-tax issue on sale)
• Own or plan to own multiple properties
• Want to reinvest rental profits rather than draw income

For a single property with a small mortgage, personal ownership may be simpler and cheaper.

Filing a CT600 with Rental Income Using Taxpipe

If your company has rental income alongside its trading profits, Taxpipe handles it on your CT600:

• Property income on the main form — Enter your property business profit and the guided wizard puts it in the right box (Box 190) — no box numbers to memorise
• Tax computed correctly — Small profits rate, marginal relief, and the main rate applied automatically, including associated-company threshold adjustments
• iXBRL accounts and computations — Micro-entity (FRS 105) accounts and tax computations generated automatically
• Direct HMRC filing — Submit your completed CT600 through your own Government Gateway account, without needing an accountant, for a flat £59

File your CT600 →

Frequently Asked Questions

Can I deduct mortgage interest in full through a limited company?

Yes. Unlike individual landlords subject to the Section 24 restriction, limited companies can deduct 100% of mortgage interest against rental income. This is one of the main tax advantages of holding property through a company.

Where does rental income go on the CT600?

Both UK and overseas rental income (net of allowable expenses) go in Box 190 of the CT600. HMRC's guidance for Box 190 explicitly covers income from land and buildings outside the UK — there is no separate box for overseas rental income. The figure should be the property business profit after deducting all allowable expenses.

Can I offset a property loss against my company's trading profits?

Yes. A UK property business loss is automatically set against the company's total profits — including trading profits and chargeable gains — of the same accounting period (CTA 2010 s.62). Any excess carries forward against future total profits while the property business continues. The one thing you cannot do is carry a property loss back to an earlier period.

Do I pay corporation tax or capital gains tax when my company sells property?

Corporation tax. Companies don't pay capital gains tax — all gains are subject to corporation tax at the company's marginal rate (19% to 25%). The gain is added to other profits to determine the tax rate.

Is it worth setting up a company for one buy-to-let property?

It depends on your tax position — see our full buy-to-let through a company guide for a detailed comparison. If you're a basic rate taxpayer with a small mortgage, the administrative costs of running a company (accounts, CT600, Companies House fees) may outweigh the tax saving. For higher rate taxpayers with significant mortgages, a company structure often saves money even on a single property.

What expenses can I deduct from rental income in a company?

All expenses wholly and exclusively for the property business: mortgage interest, insurance, repairs (not improvements), letting agent fees, legal costs, council tax during void periods, utilities if included in rent, ground rent, service charges, and accountancy fees relating to the property income.

Related Articles

• Corporation Tax for Property Companies: A Complete Landlord Guide
• Corporation Tax on Overseas Income: Guide
• Corporation Tax on Bank Interest: How It Works
• Non-UK Company Trading in the UK? When You Need to Pay Corporation Tax