Property companies are taxed on a completely different basis from individual landlords, and the headline question, "what corporation tax do property companies pay", has three answers rather than one. Get the interaction between those three figures wrong and you either overpay or assume a small profits band that the associated-companies rules have already taken away. This guide sets out how corporation tax actually works for a UK property company or SPV in 2026/27, how companies are taxed on gains and extraction, and where the real planning sits.
The starting point that catches people out is that a company does not pay capital gains tax, does not face the Section 24 mortgage interest restriction, and does not get a £3,000 annual exempt amount. It pays corporation tax on its income and its gains together, and the price of that simplicity is a second tax charge when you take the money out.
Free Incorporation and company structures tool
See the real cost and saving of incorporating
Our interactive tool is built for a larger screen. Tell us your numbers and a specialist will send your figure and the next sensible step, with no obligation.
What corporation tax rate do property companies pay in 2026/27?
Since 1 April 2023 there have been three figures, and a property company can touch all three in a single year. The small profits rate is 19%, the main rate is 25%, and a marginal relief mechanism bridges the two so that profit in the middle band carries an effective rate of about 26.5%. These rates are unchanged for 2026/27.
| Augmented profits | Rate applied | What it means in practice |
|---|---|---|
| Up to £50,000 | 19% small profits rate | Most single-property SPVs letting to unconnected tenants sit here |
| £50,000 to £250,000 | Marginal relief, around 26.5% effective on the slice | The 19% band benefit is clawed back as profit rises |
| £250,000 and above | 25% main rate | Larger portfolios and developers; also close investment-holding companies at any level |
The 26.5% figure is not a rate you apply directly. Marginal relief is computed as (upper limit minus augmented profits) multiplied by (taxable total profits divided by augmented profits) multiplied by the standard fraction of 3/200. Worked through, it taxes the band between the limits at roughly 26.5%, deliberately higher than the 25% main rate so the cheaper 19% band is unwound as the company grows. The charge sits in CTA 2010 (the small profits rate at s.18A, the main-rate charge at s.3, and marginal relief at s.18B with the formula and 3/200 fraction at s.18D).
"Augmented profits" is the comparison figure used against the £50,000 and £250,000 limits. It is taxable total profits plus qualifying exempt distributions received from companies outside a 51% group (CTA 2010 s.18L). A company with modest rental profit can be pushed into the marginal band by dividend income it receives, so the test is not simply your rental bottom line.
Why companies escape Section 24
Section 24 is an income tax rule. It restricts an individual landlord to a basic-rate tax credit on finance costs, 20% for 2026/27 and rising to 22% from 6 April 2027 in step with the new property income rates, so a geared higher-rate landlord pays tax on profit they have not really kept. A company is outside Section 24 entirely and deducts mortgage interest in full as a business expense before corporation tax. Only the corporate interest restriction can limit a company's interest deduction, and that generally bites at net interest above £2 million a year, far beyond a normal property company. This single difference is why heavily mortgaged higher-rate landlords incorporate, and it is covered in depth in our limited company versus personal ownership comparison.
The associated companies trap for multi-SPV portfolios
This is the single most expensive misunderstanding in property corporation tax. The £50,000 and £250,000 limits are not per company. Both are divided by the number of associated companies plus one, where associated broadly means under common control by the same person or people (CTA 2010 s.18E, with control taking its meaning from s.450).
A landlord who holds five buy-to-let properties through five SPVs under their own control does not get five £50,000 small profits bands. Each SPV gets £50,000 divided by five, so a £10,000 small profits band and a £50,000 upper limit. The 19% band collapses to the first £10,000 of each company's profit, the marginal band runs from £10,000 to £50,000, and anything above £50,000 per SPV is at the 25% main rate. Portfolios built into multiple SPVs for inheritance tax planning or operational separation routinely lose most of the small profits rate without realising it. Dormant companies are excluded from the count, and non-resident associates are included.
The planning response is not to collapse a sensible structure. It is to model the corporation tax cost of the structure before you build it, and where genuine independent ownership exists (different shareholders, no common-control test met) the companies may not be associated at all. Our guide to the property company group relief and corporation tax position works through how losses and gains move within a genuine group.
Close investment-holding companies: the rate that catches pure investors
A close investment-holding company (CIHC) is denied the small profits rate and pays 25% on all its profit regardless of size (CTA 2010 s.18N). For property the law contains an important carve-out: a company whose business is making investments in land that is, or is intended to be, let commercially is not a CIHC. A standard buy-to-let SPV letting to arm's length tenants therefore qualifies for the small profits rate.
The carve-out fails where the letting is not commercial. Under s.18N(3) a letting is not commercial if the land is let to a person connected with the company, the spouse or civil partner of a connected person, a relative of a connected person, or the spouse or civil partner of such a relative. So letting a flat to your own child, or to a sibling of a fellow director, can tip the company into CIHC status and lose the 19% band entirely. A company holding mainly shares, cash or family-occupied property is the classic CIHC. Mixed-purpose companies need a per-company assessment rather than an assumption.
How property companies are taxed on gains
Companies do not pay capital gains tax. When a company disposes of a property it pays corporation tax on the chargeable gain at its prevailing rate, anywhere from 19% to 25%, and it gets no annual exempt amount. The gain joins the company's other profits for the period, which has two consequences worth planning around.
First, a single large disposal can lift a company that normally sits in the 19% band up into marginal relief or the 25% main rate for that year, because the gain inflates total profits. Timing a disposal across accounting periods, or against a year with available losses, can manage the rate. Second, the gain is taxed once inside the company, and then taxed again when the proceeds are extracted as a dividend, so the combined corporation tax plus dividend tax on a company sale can exceed the 18%/24% an individual would pay on the same gain. This is exactly why a landlord planning a near-term sale often keeps the property personally. For individuals selling, our capital gains tax on property guide sets out the personal position by contrast.
Worked example: a small SPV with a disposal year
Take an SPV with £30,000 of net rental profit (rent received less mortgage interest, repairs and management) and no associated companies. In an ordinary year that £30,000 is taxed at 19%, giving £5,700 of corporation tax. Now assume the company also sells a property in the same period for a £90,000 chargeable gain. Augmented profits become £120,000, which falls in the £50,000 to £250,000 band, so marginal relief applies and the slice above £50,000 is effectively taxed at around 26.5% rather than 19%. The disposal has not just added tax on the gain, it has lifted the rate on the whole year. Splitting the disposal into a separate period, or sheltering it with brought-forward losses, can be worth real money, and that is the kind of timing a specialist models before exchange, not after.
Corporation tax versus personal income tax on the same rent
The company route is not automatically cheaper. It changes when and how you are taxed, and the answer depends on your tax band, your gearing and whether you draw the profit or reinvest it. The table below frames the comparison on the same rental income.
| Feature | Property company | Individual landlord |
|---|---|---|
| Tax on rental profit | Corporation tax 19% / 25% (effective 26.5% in the marginal band) | Income tax 20% / 40% / 45% (England, Wales and NI for 2026/27) |
| Mortgage interest | Fully deductible before tax | Restricted to a 20% tax credit under Section 24 (22% from April 2027) |
| Tax on a disposal gain | Corporation tax on the gain, no annual exemption | CGT at 18% / 24%, with a £3,000 annual exempt amount |
| Getting cash to the owner | Second charge: dividend tax 10.75% / 35.75% / 39.35% above a £500 allowance | No second charge; profit is already personal |
| Making Tax Digital | Outside MTD for Income Tax; files an annual CT600 | MTD for Income Tax live from 6 April 2026 at £50,000 |
The honest reading is that a company keeps more profit inside the structure for a geared higher-rate or additional-rate landlord who reinvests, but the extraction charge narrows or reverses that advantage for someone who needs the income to live on. Reinvesting landlords building a portfolio tend to win; landlords drawing every pound, or planning to sell soon, often do not. The numbers behind that trade-off are set out in our buy-to-let limited company guide.
Extracting profit: where the second tax layer lands
Corporation tax is only half the story, because the cash still has to reach you. The repayment order most property founders use runs director's loan first, then dividends, then salary, then employer pension contributions.
- Director's loan · If you sold property into the company at market value, the company may owe you the proceeds, creating a director's loan credit balance you can draw back tax-free over time. This is often the most efficient first call on cash.
- Dividends · After a £500 allowance, dividends are taxed at 10.75% (basic), 35.75% (higher) and 39.35% (additional) for 2026/27. The basic and higher rates rose by 2 percentage points from 6 April 2026; the additional rate is unchanged.
- Salary · Uses your personal allowance and basic-rate band but brings National Insurance into play.
- Overdrawn loans · If you take money out faster than the company can support, an overdrawn director's loan can trigger a s.455 charge of 35.75% on the balance unpaid nine months after the year end (for loans made on or after 6 April 2026), refundable when you repay. Our director's loan account mechanics guide covers the traps.
The full sequence, including pension and benefit-in-kind interaction, is in our extracting cash from a property SPV pillar, and the salary-versus-dividend balance is in our profit extraction: salary vs dividends guide.
See the real cost and saving of incorporating
Skip the spreadsheet. Tell us about your situation and a specialist will review your position and the next sensible step, with no obligation.
Property-specific corporation tax issues
Beyond the rates, a property company computation has features a generalist computation does not:
- Capital allowances · Qualifying plant and machinery inside the property attracts relief, and companies can use full expensing on new and unused qualifying plant. There is no allowance for the structure of a residential dwelling; structures and buildings allowance is for commercial and qualifying non-residential property. The capital allowances for property investors pillar sets out what actually qualifies.
- Interest deductibility · Full deduction with no Section 24, subject only to the corporate interest restriction on very large groups and to transfer-pricing and anti-avoidance rules on connected-party loans.
- Rental income timing · Rent received in advance and tenant deposits need correct period recognition; getting the cut-off wrong distorts which year the tax falls in.
- Residential Property Developer Tax · A 4% corporation tax surcharge on residential development profits above a £25 million group allowance (FA 2022 Part 2 ss.31-53, in force for accounting periods beginning on or after 1 April 2022). Most companies are below the allowance, but a build-to-sell group must model it. Our RPDT guide covers the threshold mechanics, and where the company is genuinely developing rather than investing the trading-versus-investment line decides the whole tax basis.
- Pre-trading expenditure · Costs incurred before letting begins can often be relieved against later profits, subject to the seven-year rule and the capital-versus-revenue split.
Incorporating an existing portfolio
Moving property you already own personally into a company is a disposal at market value for capital gains tax (18%/24% residential, with the £3,000 annual exempt amount for 2026/27), and the company usually pays SDLT including the 5% additional-dwellings surcharge on what it acquires. Those two costs can dwarf the annual saving, which is why incorporation is a calculation, not a default.
Section 162 incorporation relief can defer the capital gains tax where you transfer a genuine property business as a going concern wholly or partly in exchange for shares, and a pre-existing letting partnership can help on the SDLT side, but both are heavily tested by HMRC and neither is automatic. The mechanics, including the going-concern and partnership tests, are covered in our guides to transferring property into a limited company and incorporation and holdover relief. Timing the move correctly matters too, which is the subject of our incorporation timing guide.
Compliance, filing and Making Tax Digital
A property company files annual statutory accounts at Companies House, a confirmation statement, and a CT600 corporation tax return with HMRC. Two deadlines run on different clocks and the earlier one is the one people miss: corporation tax is payable 9 months and 1 day after the accounting period end, while the CT600 return is due 12 months after the period end. For a 31 March 2026 year end, the tax is due by 1 January 2027 and the return by 31 March 2027. Companies with profits over £1.5 million pay by quarterly instalments; most property companies are well below that. Records must be kept for six years from the end of the accounting period.
On Making Tax Digital, the key point is that companies are outside MTD for Income Tax. MTD for Income Tax is an individual-landlord regime, live from 6 April 2026 where qualifying income exceeds £50,000, then £30,000 from April 2027 and £20,000 from April 2028. A limited company files an annual CT600 and is unaffected. Making Tax Digital for Corporation Tax has been signalled but is not mandatory, so cloud bookkeeping linked to your property management software is sensible preparation rather than a current legal requirement. Our guide to how Making Tax Digital affects limited companies sets out the current position.
The April 2027 rate change and why it favours company structures at the margin
From 6 April 2027, property income for individuals is taxed at new separate rates of 22% basic, 42% higher and 47% additional, enacted by Finance Act 2026 (ss.6-7, Royal Assent 18 March 2026) and applying in England, Wales and Northern Ireland, with only Scotland carved out. The Section 24 finance-cost credit rises in step from 20% to 22%, so no new basic-rate wedge opens for geared landlords. The change adds 2 percentage points to individual property income at each band, which slightly widens the gap between personal ownership and the company route for higher and additional-rate landlords, without changing the underlying logic. Corporation tax rates themselves are unchanged by this measure.
When to bring in a specialist
Property corporation tax rewards getting the structure right at the outset and punishes assumptions made along the way. The areas where a specialist most often changes the outcome are the associated-companies divisor across SPVs, the close investment-holding company test, chargeable gains landing in the wrong year, the s.455 charge on extraction, and incorporation relief that fails the going-concern test. Consider professional support when your company owns multiple properties, when you are planning a significant acquisition, disposal or incorporation, when a developer element brings RPDT and the trading line into play, or when HMRC opens an enquiry. The point of specialist advice is to make sure the small profits rate, the reliefs and the extraction routes are genuinely available, rather than lost by accident.