Elite Property

Should Doncaster Landlords Hold Properties In a Limited Company?

When it comes to property investment, landlords in Doncaster have a crucial decision to make: should they hold their properties in a limited company or in their personal name? This question has become increasingly relevant in recent years, as the trend towards limited company ownership has gained traction. In this article, we will explore the advantages and disadvantages of holding properties in a limited company, providing valuable insights to help Doncaster landlords make an informed decision.

Advantages of Holding Properties in a Limited Company

Tax Benefits

One of the primary reasons landlords opt for limited company ownership is the potential for better taxation of mortgage interest. As of 2015, changes to the treatment of mortgage interest made owning property through a limited company more appealing. Unlike individual landlords who can only claim a basic rate allowance for mortgage interest, limited companies can offset 100% of the mortgage interest against their profits. This reduction in taxable profits can lead to significant tax savings for landlords.

Additionally, holding property in a limited company can offer better taxation for higher rate taxpayers. When an individual owns a property personally, rental profits are added to their other earnings and taxed as income tax. However, profits from properties held in a limited company are subject to the current rate of corporation tax, which tends to be lower than the higher rate of income tax. This difference in tax rates can result in substantial tax savings for higher rate taxpayers.

Flexibility for Tax Planning

Another advantage of limited company ownership is the flexibility it provides for tax planning. As a company director, you have the freedom to decide how to use the profits generated by your properties. You can reinvest in further properties, contribute to a tax-efficient pension plan, or strategically distribute profits as dividends. This flexibility allows for more effective personal tax planning compared to properties owned individually.

Growth Potential

Limited company ownership is especially beneficial for landlords with plans to expand their property portfolio. Higher rate taxpayers looking to build their portfolio can retain profits within the company, which can then be used to fund future property purchases without incurring income tax until the profits are withdrawn. By retaining earnings within the company, landlords can protect them from tax liabilities, allowing for faster debt repayment and portfolio expansion.

Inheritance Tax Planning

Holding property within a limited company offers more options for inheritance tax planning. Transferring a limited company to family members in the future is simpler and more tax-efficient than transferring individually owned properties. Additionally, properties held within a company may be protected from stamp duty, inheritance tax, and capital gains tax liabilities. This structure allows for greater flexibility in legacy planning and the potential to involve children and grandchildren as company shareholders.

Disadvantages of Holding Properties in a Limited Company

Higher Costs for Basic Rate Taxpayers

For landlords who fall under the basic rate tax bracket and own one or two properties, the costs associated with running a limited company may outweigh the benefits. Basic rate taxpayers are less affected by the changes to mortgage interest relief and may find it more advantageous to continue owning properties in their personal name. However, if their income increases or rental profits rise, pushing them into the higher rate tax bracket, the tax implications of owning properties individually may become more significant. In such cases, transitioning to a limited company structure should be considered.

Additional Legal Responsibilities and Costs

One of the downsides of limited company ownership is the additional legal and financial responsibilities it entails. As a director of a company, you are legally obligated to maintain accurate company and financial records and submit the appropriate accounts and returns to Companies House and HMRC. For many landlords, hiring an accountant to handle these tasks is necessary. While this ensures compliance, it also adds to the overall cost of owning properties through a limited company. On average, landlords should budget around £1000 per year for an accountant’s services, so it is crucial to weigh the tax benefits against these extra expenses.

Double Taxation for Salary and Dividends

Double taxation is an aspect of limited company ownership that often goes unnoticed. When profits are taken out of the company as either a salary or dividends, income tax must be paid in addition to the corporation tax already paid on the profits. While there are strategies to mitigate this double taxation, landlords who frequently withdraw profits from their company should seek professional tax advice and develop a suitable strategy from the outset.

No Capital Gains Tax Allowance on Sale

Selling a rental property personally allows landlords to benefit from a tax-free capital gains tax allowance. However, this tax advantage is not available when selling property through a limited company. Instead, limited companies are subject to corporation tax on their gains. While the tax rate for corporation tax may be lower than individual income tax rates, it is essential to consider the overall tax efficiency throughout the rental period and seek expert advice before making any decisions regarding the sale of properties.

Higher Mortgage Costs for Limited Companies

Currently, limited companies face higher interest rates and fees compared to individual buy-to-let mortgages. However, it is important to note that stress testing by lenders often favors limited companies over personal ownership. To ensure the best deal, landlords should seek the services of a specialist limited company mortgage broker who can navigate the market and find the most suitable mortgage options. While there may be additional costs associated with limited company mortgages, it is crucial to assess the overall tax savings against these higher expenses.


The decision of whether to hold properties in a limited company or personally is a significant one for Doncaster landlords. While there are advantages to limited company ownership, such as tax benefits, flexibility for tax planning, growth potential, and inheritance tax planning, there are also disadvantages to consider, including higher costs for basic rate taxpayers, additional legal responsibilities, double taxation for salary and dividends, the absence of a capital gains tax allowance on sale, and higher mortgage costs for limited companies.

Ultimately, the choice depends on individual circumstances, tax implications, and long-term goals. It is crucial for landlords to consult with their accountants and seek professional advice to determine the most suitable ownership structure for their property investments. By carefully weighing the pros and cons, Doncaster landlords can make informed decisions that align with their financial objectives and maximize their returns in the property market.