Corporation Tax on Commercial Property (Company Landlords)
Written by Scott Jones, founder of CommercialPropertyKiln · Last updated
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If you hold commercial property in a limited company, rental profit and gains are taxed to corporation tax rather than income tax and CGT. For many landlords this is more efficient, and crucially the Section 24 restriction does not apply.
The rates
Corporation tax is charged at 19% on profits up to 50,000, 25% on profits above 250,000, with marginal relief in between. This applies to both rental profit and gains on disposal.
Full interest deductibility
This is the important one. The Section 24 finance-cost restriction that hit residential landlords does not apply to commercial property. A company (or an individual) letting commercial property can deduct loan interest in full against rental profit. For a geared commercial portfolio this is a significant advantage over residential buy-to-let.
Extracting profit
Profit taken out of a company as salary or dividends is taxed again in your hands, so model the total tax, not just the corporation tax. Rolling profit up inside the company to reinvest can be efficient; drawing it all out may not be.
Is a company right for you
A company suits portfolio landlords rolling up income and reinvesting, but adds cost and complexity, and moving existing property into a company can trigger SDLT and CGT. Weigh it up in SPV vs personal ownership.
Can a company deduct mortgage interest on commercial property?
Yes, in full. The Section 24 restriction that hit residential landlords does not apply to commercial property.
What are the corporation tax rates?
19% on profits up to 50,000, 25% above 250,000, with marginal relief in between, on both rental profit and gains.