Property investment isn’t just about finding the perfect property. It’s also about getting the financials right, which can sometimes feel overwhelming. 

It’s very common to get that nagging feeling that you’re not running your properties as efficiently as possible, missing out on tax-saving opportunities, or not positioning your business for long-term growth.

We’ve put together this guide to help property investors like you handle the financial side properly. Whether you’re just starting out or already have a portfolio, you’ll find practical advice here on everything from choosing the right structure for your investment to managing your tax position effectively. 

Let’s start with one of the most fundamental choices you’ll need to make: how to structure your property investment business. This decision affects everything from the tax you’ll pay to how you can grow your portfolio in the future.

Getting your structure right

That first big decision – whether to buy property in your own name or through a limited company – isn’t one to rush. Each option has advantages, and what works brilliantly for one investor might be wrong for another.

Let’s break down both options:

Buying in your own name

Owning property personally is a simple and popular choice, especially for those just starting out or managing a small portfolio. 

Rental income from properties owned in your name is reported through self-assessment and included as part of your overall personal income.

It’s taxed at the following standard income tax rates:

• Basic rate: 20%
• Higher rate: 40%
• Additional rate: 45%

The benefits of this primarily relate to simplicity, including:

1. Ease of administration: Personal ownership involves less paperwork. You’ll need to complete a self-assessment tax return annually, but you avoid the added task of filing corporation tax returns and maintaining company accounts.
2. Lower capital gains tax (CGT): When selling a property, individuals typically pay CGT at lower rates (18% for basic-rate taxpayers and 28% for higher-rate taxpayers) compared to the effective tax on profits within a company. This can make a sizeable impact if you anticipate selling properties in the medium term.
3. No double taxation: Since rental income is taxed as part of your personal earnings, there’s no secondary tax when you withdraw profits, unlike in a company structure where profits first face corporation tax before being drawn as dividends or salary.

But of course, there are some drawbacks, such as:

1. Taxation on higher incomes: Income tax for higher-rate taxpayers can substantially reduce net rental income. The inability to deduct mortgage interest (replaced by a 20% basic-rate tax credit) has further reduced tax efficiency for personal landlords. More on this shortly. 
2. Limited long-term tax planning: Personal ownership offers fewer opportunities for tax-efficient reinvestment or succession planning. Building a larger portfolio may become less practical as higher personal tax rates erode profits.
3. Reduced mortgage options for portfolio landlords: While individual landlords often access competitive mortgage rates, those with multiple properties under personal ownership may face stricter lending criteria due to tax and regulatory changes.

Creating a limited company

Recent tax changes have pushed more landlords toward company ownership than ever before. 

Over 46,000 buy-to-let companies were set up in 2024 alone – a 23% rise from the previous year. This is driven by solid tax advantages.

When you form a limited company, it becomes a separate legal entity. Profits are subject to corporation tax, which, as of April 2023, is 25% for profits over £250,000 and 19% for profits up to £50,000. 

Marginal relief applies to profits in between, resulting in a gradual increase in the effective tax rate.

Dividends: Tax-efficient flexibility

A key benefit of using a company is the ability to pay dividends, which are only taxed when withdrawn. This allows profits to remain in the business, taxed at corporation tax rates, until you decide to extract them. 

For higher-rate (40%) or additional-rate (45%) taxpayers, this can reduce overall personal tax liabilities and provide greater control over cashflow.

Mortgage interest: Full deductibility

Mortgage interest rules also favour companies. While individual landlords are limited to a 20% tax credit on mortgage interest, companies can deduct all finance costs before calculating tax. 

For properties with substantial mortgages, this difference alone can make a company structure more appealing.

Disadvantages

However, company ownership isn’t all advantages. You’ll need to:

• File annual accounts and corporation tax returns
• Pay for a company tax return as well as your personal one
• Think carefully about salary vs dividends for taking money out
• Deal with additional regulatory requirements
• Usually pay higher mortgage rates
• Pay accountancy fees for company accounts

The decision often comes down to three main factors: how much profit you make, how much you need to take out of the business, and your growth plans. For higher-rate taxpayers planning to build a portfolio over time, company ownership often makes sense despite the extra administration.

Need advice?

The best structure depends on your unique circumstances. Contact EV Accountants for expert guidance tailored to your property investment goals.

Tax planning for property investors

Proper tax management matters at every stage of property investment. From the moment you start looking at properties to the day you eventually sell, tax influences your decisions and bottom line. 

Let’s break taxes down across the property investment cycle:

When you buy

Your first major tax consideration comes before you even get the keys – Stamp Duty Land Tax (SDLT). The October 2024 budget brought major changes here. 

Since October 2024, property investors have faced a steeper additional property surcharge, now at 5%, up from the previous 3%. This comes on top of the standard SDLT rates.

For a £300,000 property:

• Basic SDLT: £5,000
• Additional property surcharge: £15,000
• Total up-front tax: £20,000

These amounts grow substantially with property value. A £500,000 purchase means finding £40,000 for SDLT alone – that’s £15,000 basic rate plus £25,000 surcharge. This tax needs to be paid within 14 days of completion.

For commercial property, the rates are much lower:

• Up to £150,000: 0%
• £150,001 to £250,000: 2%
• Over £250,000: 5% With no additional property surcharge

This means a £500,000 residential investment property costs £37,500 in SDLT, while the same value commercial property costs just £14,500. 

That £23,000 difference is making many investors look more closely at commercial opportunities. Mixed-use properties can also benefit from the commercial rates, though you’ll need clear evidence of genuine commercial use.

These purchase costs aren’t wasted money, though. When you eventually sell, everything you spend acquiring the property becomes part of your ‘base cost’ for CGT calculations.

While you’re letting

This is where tax planning gets complex. Your rental income needs careful management to ensure you’re claiming everything you’re entitled to while staying within HMRC’s rules.

Personal ownership adds your rental profits to your total income, which can push you into a higher tax band if your combined income exceeds the basic rate threshold. 

Many new landlords are surprised by this, assuming their rental income will be taxed entirely at their current rate.

Company ownership works differently, with all profits facing corporation tax at 19% or 25%. This can look attractive, especially for higher-rate taxpayers, but remember you’ll face more tax when taking money out of the company through dividends or salary

Allowable expenses

For both self-assessment (for personal landlords) and corporation tax returns (for companies), HMRC allows the deduction of a wide range of allowable expenses from rental income before calculating taxable profit. 

However, the rules for allowable expenses differ between individuals and companies, with businesses often able to deduct a broader range of costs, such as full mortgage interest and certain capital allowances.

Your property’s running costs form the backbone of allowable expenses:

• Buildings and contents insurance
• Ground rent and service charges
• Council tax during vacant periods
• Utilities you pay for
• Security and maintenance
• Cleaning between tenants

Professional fees make up another large category:

• Letting agent fees and management charges
• Accountancy costs
• Legal work for tenancy agreements
• Property management software
• Professional memberships
• Safety certificates and checks

Repairs and improvements

The distinction between repairs and improvements often causes confusion. Repairs maintain the property at its existing standard and are tax-deductible. This includes fixing leaking roofs, replacing broken windows with similar ones, repairing kitchen units, and treating damp.

Improvements that add value aren’t deductible against rental income but instead form part of your capital gains calculations when you sell. 

Mortgage interest

Since April 2020, individual landlords can no longer deduct mortgage interest payments from their rental income to reduce taxable profits. Instead, they receive a tax credit equal to 20% of their mortgage interest payments. This shift particularly affects higher-rate taxpayers, who previously benefited from relief at their higher tax rates.

In your example, with a salary of £60,000, rental income of £20,000, mortgage interest of £8,000, and other expenses of £2,000:

• Rental profit calculation: Rental income (£20,000) minus other expenses (£2,000) equals £18,000. Mortgage interest is not deducted at this stage.
• Tax calculation: Adding the rental profit to your salary results in a total income of £78,000. Assuming the higher-rate tax threshold is £50,270, the taxable rental income would be subject to 40% tax: £18,000 × 40% = £7,200.
• Tax credit application: You receive a tax credit of 20% on the £8,000 mortgage interest: £8,000 × 20% = £1,600.
• Final tax liability: Subtracting the tax credit from the tax due: £7,200 − £1,600 = £5,600.

Under the previous system, you would have deducted the mortgage interest before calculating taxable profit, leading to a lower tax bill. 

This change means higher-rate taxpayers now receive relief at the basic rate of 20%, rather than their marginal rate, increasing their overall tax liability.

Many landlords have responded by considering incorporation, as operating through a limited company allows mortgage interest to be deducted before calculating corporation tax. 

When you sell

CGT applies to any profit from the eventual sale of the property, and the rates have increased from October 2024. Basic-rate taxpayers now pay 18% on residential property gains, while higher-rate taxpayers pay 28%.

The annual tax-free CGT allowance drops to just £3,000 from April 2024. This makes careful timing of property sales more important than ever. You might want to spread sales across tax years to use multiple allowances.

Your taxable gain isn’t simply sale price minus purchase price. You can deduct:

• All your purchase costs
• Improvement works made during ownership
• Sale costs like legal and estate agent fees
• Certain letting reliefs where applicable

If you ever lived in the property as your main home, Private Residence Relief could reduce your bill significantly. This covers the time you lived there and the last nine months of ownership automatically.

For companies

CGT does not apply to companies. Instead, gains made on the sale of properties owned by companies are subject to corporation tax. This can make company ownership more tax-efficient for landlords planning to reinvest gains.

If you’re ever lost or confused about property taxation, what to pay, when, and how, then request professional advice. It will help you plan effectively and avoid costly mistakes. 

At EV Accountants, we can help you structure your property investments tax-efficiently from day one.

Tax efficient strategies for property investment

While you can’t avoid tax entirely, smart structuring and timing can help maintain your profits. The key is making informed decisions early. Here are some strategies for ensuring your property investment is tax-efficient:

Company structure decisions

If your portfolio is expanding, consider incorporating as a business. Companies offer multiple strategies for both growth and property investment. 

A basic strategy involves taking a salary up to your personal allowance to use your National Insurance contributions, and then using dividends for additional income. 

Director’s loans can provide flexibility too. You might lend money to your company when buying properties, then withdraw it later without triggering income tax. 

Mixed use and commercial routes

Recent tax changes have made commercial and mixed-use property particularly attractive. SDLT rates are substantially lower – a £500,000 commercial property costs £14,500 in SDLT versus £37,500 for residential. Mixed-use properties like shops with flats above can access these lower rates too.

Commercial property opens up capital allowance opportunities too. You can claim for integral features like electrical systems, plumbing, and heating. Some properties might qualify for the Annual Investment Allowance, letting you deduct up to £1 million from profits in the year of purchase.

Enterprise Zones offer enhanced capital allowances in certain areas. Some zones allow 100% first-year relief on qualifying plant and machinery, significantly reducing your tax bill in the early years.

Succession planning

The new £1m cap on Business Property Relief (BPR) and Agricultural Property Relief (APR) from April 2025 changes inheritance planning. Only the first £1m gets full relief, with 50% relief on anything above. This makes early planning crucial to avoid hefty bills. 

Family investment companies offer a flexible way to pass on property wealth. You can create different share classes, controlling voting rights while passing economic benefits to family members. This lets you maintain control while reducing your estate’s value for inheritance tax.

You can also consider trust structures for longer-term planning. While transfers into trust can trigger immediate tax charges, they offer protection and control over how assets pass to the next generation.

Managing your cashflow

Strong cashflow forms the foundation of every successful property business. Professional investors develop sophisticated cash management systems that protect their investments and enable growth. 

The basics include creating a maintenance fund totalling around 10% of annual rental income for each property. This covers both routine repairs and larger periodic expenses like boiler replacements, roof repairs, or full redecorations between tenancies. 

Beyond maintenance, you need a void period buffer amounting to at least three months’ rent and mortgage payments. Even with good tenants and professional management, gaps between tenancies happen. Properties can sometimes take longer than expected to re-let, especially if they need work or the market slows.

You’ll also need a dedicated tax reserve. Set aside monthly contributions based on your tax band and likely liability. Getting caught short at tax time can force costly decisions like selling properties or taking expensive short-term loans.

Managing debt for growth

Smart borrowing can accelerate your growth but needs careful planning. Structure your mortgages strategically – consider fixing some loans for security while keeping others variable for flexibility. Spread your refinancing dates so everything doesn’t come due at once. This gives you breathing room if market conditions temporarily worsen.

Keep some properties with lower loan-to-value ratios. This gives you refinancing options to raise deposits for new purchases without selling. It also provides crucial protection against market downturns and interest rate rises. Many successful investors aim to reduce leverage on some properties as their portfolios grow, creating a stable base for further expansion.

Level up your property investment business with EV Accountants

Property investment offers excellent potential for building long-term wealth, but success rarely happens by accident. The right structure, careful tax planning, and professional support make all the difference between struggling with a handful of properties and building a thriving portfolio.

At EV Accountants, we specialise in helping property investors succeed. Our team works with investors at every stage:

• First-time landlords setting up their initial structure
• Growing investors planning their next purchase
• Established portfolios looking to optimise their tax position
• Property developers needing ongoing tax guidance
• Investors planning their succession strategy

Most importantly, we understand that every investor’s situation is different. We’ll take time to understand your goals and help develop strategies that work specifically for you. 

Whether you’re just starting out or looking to optimise an existing portfolio, we can help you make better decisions and build lasting wealth through property.

For a detailed discussion about your property investment plans, contact our friendly team. Let’s work together to build your property success story.