UK Tax Alert | Personal Name vs. Company Name: Which is Better for Renting Out Property?

With mortgage interest rates remaining high and showing no signs of decreasing, the cost for landlords investing with a buy-to-let mortgage has undoubtedly increased, reducing profit. Many have suggested holding property in a company name to cut costs, as mortgage interest can be calculated into company expenses, whereas for properties held in personal names, only 20% of the interest can be calculated into the rental costs. Thus, the two will have different methods of calculating tax liabilities. The following two examples will illustrate this more clearly:

Example: Property price £300,000, LTV ratio 66% mortgage loan, 15-year loan term, interest-only mortgage, mortgage interest rate calculated at 4.5%, first year mortgage repayment £8,988, rental income calculated at 6% average UK rental return, so £18,000.

If the property is held in your personal name, and the rent is your only income, the income tax calculation would be: (£18,000 - £12,571- 1797.6) X 20% (basic tax rate) = £726.3

If the property is held in a company name, and the company's net profit is less than £50,000, the corporate tax rate is 19%: (£18,000 - £8,988) X 19% = £1712.28

Therefore, whether to hold the property in a company name depends on the landlord's personal income and the value of the property. If you have any tax questions, you can contact us at any time. Our team can consult for you and find the tax solution that suits you best.