Buy the right property in the right area and you’re halfway there. That’s what most landlords focus on, and fair enough. But how you actually hold that property can matter just as much as which property you chose.
Tax bills, liability, what you pass on to your family, your ability to grow the portfolio further, all of it is shaped by the structure sitting underneath your investments. And yet a surprising number of landlords have never really sat down and thought it through.
Here’s a practical rundown of what good portfolio structuring looks like in the UK today.
Personal ownership: Still worth considering, but know the limitations
Holding property in your own name is where most people start, and honestly, for some investors it still makes perfect sense. You declare rental income through Self Assessment, pay Income Tax at whatever rate applies to you, and the admin stays relatively simple.
The catch is Section 24. Since 2020, individual landlords can no longer deduct mortgage interest from their rental income before calculating tax. Instead there’s a 20% tax credit on finance costs. For a basic-rate taxpayer that’s largely going to cancel itself out, but if you’re earning enough to push into the higher rate bands, you could end up paying tax on money already swallowed by your mortgage.
Personal ownership makes most sense if your properties are unencumbered, if you’re a lower earner, or if you genuinely need the rental income to live on right now.
Why so many landlords are looking at limited companies
The appeal of holding property through a limited company comes down to a few things. Corporation Tax rates (19% up to £50,000 of profit, 25% above £250,000) are generally lower than higher-rate Income Tax. Mortgage interest remains fully deductible as a business expense. And profits left inside the company grow without an immediate personal tax hit.
For someone building a portfolio with a long-term view, that tax-efficient compounding can be genuinely powerful.
But it’s not without its complications. Limited company buy-to-let mortgages tend to carry higher interest rates than personal ones. Getting money out of the company, whether via salary or dividends, brings its own tax consequences. And if you’re thinking of moving properties you already own personally into a company, be prepared for a conversation about Stamp Duty Land Tax and Capital Gains Tax on the transfer. It can be done, but it needs careful planning.
Choosing the right company structure
SPV (Special Purpose Vehicle)
Most property investors use a Special Purpose Vehicle, a company set up specifically and solely to hold property. Mortgage lenders understand these well, which makes financing easier. For most people starting out with a company structure, an SPV is the natural choice.
Family Investment Company (FIC)
A Family Investment Company works rather differently. Parents or grandparents contribute funds (usually as a loan), family members hold shares, and any growth in value flows to the next generation through their shareholding. Done well, it’s a smart way to build and transfer wealth without some of the Inheritance Tax consequences of simply gifting money or property outright. The legal and tax setup is more complex though, so it really does need specialist input.
Trading companies: Worth a mention, but rarely the right fit
Some landlords hold property inside a broader trading company. Lenders tend to dislike it, it complicates the accounts, and there’s rarely a compelling reason to do it over an SPV. For most property investors it isn’t the answer.
Ownership, tax planning and what happens when you sell
How you share ownership matters
Owning property as tenants in common rather than joint tenants gives you the ability to hold different percentage shares. File a Form 17 with HMRC to confirm a split that isn’t 50/50, and you can direct more of the rental income to whichever partner pays the lower rate of tax. It’s a simple step that plenty of couples never get around to taking.
Inside a limited company, alphabet shares can give you flexibility over how dividends are paid to different shareholders. HMRC’s settlement legislation applies, so it needs to be structured properly, but it’s a legitimate approach used by many property-owning families.
Selling up: Capital gains tax realities
At some point, properties get sold. Residential property gains are currently taxed at 18% for basic-rate taxpayers and 24% for those in the higher rate band, following changes in the 2024 Autumn Budget. Your annual CGT exemption sits at just £3,000 from April 2024, so there’s very little to shelter modest gains with.
If a property was your main home at any point, Private Residence Relief could reduce the gain. If the property is held inside a company, it’s Corporation Tax on the gain rather than CGT, though whether that’s better or worse depends entirely on your circumstances.
Passing it on: Inheritance tax planning
This is the part that catches people out most often. Residential property doesn’t qualify for Business Property Relief, so every pound of property value above your available nil-rate bands sits in your estate and faces a potential 40% tax charge.
For anyone who has spent years building a portfolio, that’s worth taking seriously before it becomes someone else’s problem to sort out. Lifetime gifting, trusts, using a Family Investment Company to move future growth out of your estate, and life insurance written in trust to fund the bill are all worth understanding.
A sensible starting point
If you’ve never properly reviewed how your portfolio is structured, start here:
- Write down every property you own, how it’s held, and what it earns
- Work out what you’re actually paying in tax across all of it
- Be honest about what you want the portfolio to do for you in ten or twenty years
Talk to an accountant before making any structural changes, particularly if transfers are involved - Set a reminder to review things annually, because if the rules change, so will your circumstances.
How 3E's Accountants can help
We work with property investors across the UK, from those just getting started with their first buy-to-let to those managing larger portfolios across multiple structures. If you want to understand your current position and whether there’s a better way to hold what you own, we’re happy to talk it through. Get in touch with the team at 3E’s Accountants for a no-obligation consultation.
