Thank you to everyone who joined us at Phillip Shaw estate agent’s event this month. Jake Lew, our Head of Property, explained key considerations for landlords, developers & investors.
Jake’s talk covered:
- Owning property in a limited company vs personally holding
- Difference between repairs and capital improvements for tax purposes
- Incorporation pitfalls
- Making Tax Digital – planning for April 2026
Smart Tax Planning for Landlords: recap
Thank you to Shyam Mistry, Business Development Manager at Phillip Shaw, for his recap of key insights from the event, including Jake’s below.
‘Jake Lew of BKL dived into the ever-important topic of property tax. In a relatable and down-to-earth way (yes, even tax can be interesting!), Jake compared the pros and cons of holding property investments personally versus through a limited company and offered timely tips on inheritance and upcoming digital tax changes.
Personal v company ownership
Jake started by tackling a common question: Should you hold your buy-to-lets in your own name, or under a company? The answer, unsurprisingly, depends on your situation.
If you hold property personally, rental profits are taxed as personal income – which for many landlords means a 40% or 45% income tax rate, and the inability to deduct full mortgage interest (thanks to recent tax changes). However, selling a personally held property qualifies for capital gains allowances, and it’s simpler in terms of paperwork. When a residential property is disposed of, a CGT return needs to be filed within 60 days and any capital gains tax paid within the same timeframe.
If you use a limited company, the profit is subject to corporation tax (currently 25% where profits exceed £250k). This can be beneficial if you’re a higher-rate taxpayer and you plan to reinvest profits (since corporation tax can be lower than personal rates). Moreover, mortgage interest is fully deductible inside a company, which can significantly improve net yields for leveraged investors. But Jake cautioned that drawing money out of a company (as dividends or salary) then brings personal tax back into play – so if you need the rental income for living costs, some tax savings might be lost. He also mentioned that operating via a company comes with additional responsibilities (annual accounts, filings) and costs.
In short, there’s no one-size-fits-all answer. Jake’s advice was to crunch the numbers and consider your long-term goals.
If you plan to keep scaling your portfolio and can leave profits rolling up in the company, a company structure might pay off. On the other hand, smaller landlords or those needing regular income may stick with personal ownership. Engaging a good property tax adviser to model scenarios can be invaluable before making the jump.
Difference between repairs and capital improvements
Jake also gave a reminder of the differences in repairs and capital improvements for tax purposes. In summary, if you’re just fixing what’s broken, it’s likely a repair (expense) and if you’re improving or upgrading, its likely a capital improvement (capitalised).
Inheritance Tax & Passing Down Property
One insightful segment of Jake’s talk was about inheritance tax (IHT) and planning for the future.
Many landlords want to pass their properties to their children or family eventually, and Jake explained that how you hold assets (personally or via a company) affects this planning. For example, if you hold property in a company, you’re essentially passing on shares of the company rather than the property itself. This can open up strategies like gifting shares over time or using trust structures to slowly transfer ownership, potentially reducing IHT exposure. However, he stressed that IHT still applies to company shares, so having a company doesn’t eliminate estate taxes – you need a plan for that too.
Jake also pointed out that limited company ownership can complicate inheritance if not set up correctly. Without proper planning, your heirs might face hefty tax bills or difficulties accessing the property equity. The key takeaway was to start estate planning early. Whether through life insurance to cover IHT, gradually transferring ownership, or setting up its structure (like Family Investment Companies), proactive steps now can future proof your portfolio for the next generation.
Pitfalls of Incorporation Relief
A cautionary tale came up about landlords rushing to incorporate existing portfolios. Incorporation relief can, in theory, let you transfer properties into a company without immediate capital gains tax, but Jake warned of potential pitfalls.
To qualify as a tax-free “incorporation,” your rental activity must be a genuine business (generally requiring 20 hours per week or more spent managing it). Without meeting strict conditions, transferring a property to a company is treated as a normal sale – triggering capital gains tax for you and stamp duty for the company on market value transfers.
Even when relief applies, unexpected costs can arise. Jake shared that oftentimes landlords find the tax savings smaller than expected, and there can be drawbacks when selling later or passing the property to children if it’s in a company structure. His friendly advice: “Look before you leap into incorporation”. Always seek professional tax advice to navigate these rules, because unwinding a misstep can be costly.
Making Tax Digital for landlords
To wrap up, Jake gave everyone a heads-up about Making Tax Digital (MTD).
From April 2026, many landlords will be required to keep digital records and file income tax updates quarterly instead of the old annual tax return. (This will start with landlords earning over £50,000, then extend to others later.) His tip: start preparing now. That means getting your record-keeping digital – using software or apps for your rents and expenses – and talking to your accountant about the changes. By embracing digital tools early, you’ll avoid a last-minute scramble and might even simplify your workflow. As Jake noted, a positive side to MTD is more up-to-date insight into your business finances, which savvy investors can use to their advantage.
In essence, Jake Lew’s session reminded us that smart tax planning can significantly boost your returns and safeguard your investments. Whether it’s choosing the right ownership structure, planning for inheritance, or complying with new tax rules, staying informed and proactive on the financial side is just as crucial as picking the right property.’
Shyam’s full summary of the event is available here. It covers the other speakers and their topics:
- Local Market Trends & Landlord Strategies – Akhil Shah, Property Expert at Phillip Shaw
- Bridging Finance for Flexibility – Charles Creak, Business Development Manager at KSEYE
Whether you’re developing or investing, focused on commercial or residential, our property specialists know your challenges – from regulations and tax to finance and structuring. Get in touch today for a chat about how we can help you.