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. For FY 2024/25 and 2025/26:

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, 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 UK property business (net rental profit after deductible expenses)
• Box 195 — Income from an overseas property business
• Box 172 — Non-trading loan relationship profits (this is where mortgage interest might end up if it's not allocated to the property business — but for most companies, mortgage interest on rental property is a property business expense, deducted before Box 190)

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. The rules for property losses are different from trading losses:

Key rules

• Carry forward only — property losses can only be set against future property business profits. They cannot be carried back or set against trading profits
• No current-year offset against other income — unlike trading losses, property losses stay ring-fenced
• Exception: capital allowances — if the property loss arises from capital allowance claims (e.g., on commercial property fixtures), that portion can be set against total profits of the current period
• Group relief — property business losses can be surrendered to group companies

Example

Your company has £30,000 in trading profits and a £10,000 property business loss. The property loss cannot be set against the trading profits. It carries forward to set against future property income only.

This makes property losses less flexible than trading losses — a key planning point when structuring property investments.

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).

Stamp Duty Land Tax (SDLT) for Company Purchases

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

• 3% surcharge applies on all residential property purchases by companies (on top of standard rates)
• For properties over £500,000 purchased by a company (non-qualifying), the flat 15% rate may apply under the Annual Tax on Enveloped Dwellings (ATED) rules — 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 — 3% 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 Your Property Company CT600 with Taxpipe

Whether you're a landlord with one buy-to-let or a portfolio investor, Taxpipe handles property income on your CT600:

• Property income inputs — Enter rental income and expenses, and Taxpipe calculates the property business profit
• Mortgage interest — Full deduction applied correctly
• Loss management — Property losses carried forward automatically
• iXBRL accounts — Generated with correct property income disclosures
• Direct HMRC filing — Submit your completed CT600 without needing an accountant

File your property company 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?

UK rental income (net of allowable expenses) goes in Box 190 of the CT600. Overseas rental income goes in Box 195. 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?

Generally, no. Property business losses are ring-fenced and can only be carried forward against future property business profits. The exception is losses arising from capital allowance claims, which can be set against total profits of the same 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