Jack Martin
- Associate
- Private Client
UK property ownership: Personal vs corporate ownership – what is the tax impact?
When it comes to purchasing property in the UK, deciding whether to buy through a corporate vehicle or personally can significantly impact your financial outcomes.
The tax implications vary greatly between personal and corporate ownership, affecting everything from stamp duty land tax (“SDLT“) on purchase, tax on disposal, and inheritance tax (“IHT“) typically chargeable on death. Understanding these differences is crucial for making an informed decision that aligns with the purchaser’s specific circumstances and financial goals. We consider the key considerations that will help navigate this important choice.
SDLT
When acquiring a property in the UK, SDLT is payable by the purchaser on the consideration for the property typically the purchase price) unless the transaction is an exempt one. An example of an exempt transaction is one where there is no chargeable consideration, such as a straightforward gift of property which is not subject to a mortgage.
Broadly, for personal ownership, up to £125,000 of the consideration is zero rated for SDLT; the next £125,000 (the portion from £125,001 to £250,000) is subject to SDLT at the rate of 2% and this continues to increase, as summarised below:
| Property or transfer value | SDLT rate |
| Up to £125,000 | Zero |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
From 1 April 2025, an additional 5% surcharge will generally apply to buyers of second homes, in addition to the standard rates summarised above.
For acquisitions by companies, partnerships (with at least one corporate member) or collective investment schemes, SDLT is typically charged at a flat rate of 17% on residential property costing more than £500,000.
The SDLT liability is likely be higher when buying a UK residential property through a corporate vehicle, compared to buying personally.
Annual Tax on Enveloped Dwellings (“ATED”)
Where residential property is owned by a company, partnership (with at least one corporate member) or collective investment scheme (collectively described as “non-natural persons”) and is valued at over £500,000, that non-natural person may also be liable to ATED.
ATED is a separate tax to SDLT and is charged on a daily basis based on property value, with the total annual charge ranging from £4,450 to £292,350 on chargeable amounts for the period 1 April 2025 to 31 March 2026 depending on the value of the value of the property.
There are various reliefs available from the payment of ATED, include where a property is held for the purposes of generating a rental income and run on a commercial basis.
If a UK residential property is purchased by an individual through a non-natural person, the liability to ATED should be checked before proceeding.
When purchasing a property personally, ATED does not apply.
Tax on capital gains
Capital gains tax (“CGT“) can apply where a property is held personally and is sold or disposed of. If a property has been used as an individual’s main home at some time during the period of ownership, however, all or part of any gain will be exempt from CGT under private residence relief. Relief will apply in full where the property has been the individual’s main home for the entirety of their ownership (or all but the last nine-months of it). If the property has been used as a second home or a buy-to-let property for the whole of the ownership period, CGT will be payable on any gain, at the rate of either 18% for basic rate taxpayers or 24% for higher and additional rate taxpayers, subject to any exemptions or reliefs.
In the case of a UK residential property held via a company, when the property is sold, UK corporation tax will be payable on the profits made from the sale of the property, whether the company is usually subject to UK taxation or not. The current main rate of corporation tax is 25%. Shareholders may also be subject to UK tax on any part of the gain which is not chargeable to the company and upon extraction of the net profits from the company in the form of dividends and specific tax advice should be sought.
Inheritance tax and succession
If a UK property is personally owned or held in a UK company, on death the property or the shares in the company will be a chargeable asset for IHT purposes. To the extent that the property or shares pass to beneficiaries who are not exempt from IHT, the value will be subject to IHT at the rate of 40%, subject to IHT allowances and reliefs. Certain categories of beneficiary are exempt, including UK charities and spouses/ civil partners (subject to a limitation in some cases where the spouse/ civil partner is not a long-term resident of the UK).
Even if a UK property is purchased within a non-UK company structure, IHT will be payable on the value of the shares to the extent the value of the shares derives from the property, subject to exemptions and reliefs and to the extent that the shares pass to non-exempt beneficiaries.
If UK property is personally owned, it would be advisable to put a Will in place to ensure that the property passes on death to the owner’s chosen beneficiaries, and in the most IHT-efficient manner possible.
Summary
In conclusion, the decision to purchase a UK property either personally or through a corporate vehicle hinges on a variety of tax implications and individual circumstances. Personal ownership offers benefits such as lower SDLT rates, the CGT “main home” exemption and no liability to ATED, while corporate ownership may result in higher SDLT, corporation tax and ATED liabilities but can provide strategic advantages. With corporate ownership, there are also non-tax considerations to bear in mind such as disclosure on the PSC (People with Significant Control) register for UK registered companieas, or where the property is owned by an overseas entity, the Register of Overseas Entities will need to be completed. Each approach has its own set of benefits and potential drawbacks, making it essential to carefully evaluate your specific financial situation.
If you are considering acquiring a UK property, please do not hesitate to contact a member of the Residential Property or Private Client teams who can help you make the most informed decision.
This article is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law. Specific advice should always be sought for individual cases.
Meet the team:
Nick Stone
- Partner
- Residential Property
