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The Accountants for Growth

How to plan your property investment portfolio

How to plan your property investment portfolio

Benchmarking Finance

If you need to purchase using loan finance, will a mortgage company lend to your limited company rather than yourself? If yes, will they charge a penal rate?

Profit making

Are you likely to make an annual profit, i.e. Rental income is over and above costs (such as mortgage interest). If you are, and your tax rate taking into account all other income such as earnings is more than 20%, it may be beneficial to use corporate rates of 20%. The possible trap, however, is that if you subsequently need to withdraw funds from the company, particularly if you draw it as salary, you could actually be worse off than owning the properties in your own name.

Future investment

Is the intention to build up a surplus income to use to put down as deposits on future property purchases? If this is an intention, you are a higher rate tax payer at 40% or 50%, then there is a clear advantage to using a limited company, as its tax rate is only 20% and therefore 80% of any profit can be re-used to purchase future property, rather than what is left after your personal tax rates.

Investment strategy – short to medium term (i.e. less than 8 years)

It is probably better to own the property personally as you will get an annual capital gains tax exemption (doubled if your partner owns the property with you) as well as the tax rate of the maximum currently 28%. The problem with owning the property in a company, if selling in the short to medium term is that whilst you have only paid tax at 20% on the gain, you will then have to pay tax on either a dividend or salary if you wish to extract the funds. Unlike individuals, company’s still get indexation when calculating a capital gain.

Investment strategy – long term

Building up a property portfolio that generates a surplus income means that you could pay out dividends of approx. £35,000 per shareholder ignoring any other income once you have retired with only an effective 20% tax rate having been paid on those funds.  Many people regard their retirement planning as being a mixture of traditional pensions as well as a property portfolio. If the property portfolio has grown as expected, it would potentially be possible to defer taking pensions such that you draw down on the company’s income and exhaust that value before drawing on enhanced pension.


Owning multiple properties in a single company and planning with the shares in that company can be a lot more straight forward if, for example you wish to pass on a small fraction of value to family members or create tax efficient structures using Trusts during your life time or through your Will.  



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The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal or accounting advice and should not be relied upon as advice. Please see our website's terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact us and one of our accountants will be happy and able to advise you on your own particular circumstances.

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