A family investment company for property investors

Sometimes. A company that exists wholly or mainly to let land commercially is not a close investment-holding company, so it can use the 19% small profits rate and marginal relief rather than a flat 25%. Letting to unconnected tenants counts as commercial. The £50,000 and £250,000 limits are divided by the number of associated companies plus one, so other companies under the same control reduce the benefit. Larger portfolios, or groups with several associated companies, often pay at or near 25%.

A letting to a person connected with the company, or to their spouse, civil partner or relatives, is not a commercial letting. A family investment company that lets a home to a child, for example, is likely to be a close investment-holding company on that activity and pay 25% on all its profits, with no small profits rate. Whether the company is still mainly a commercial lettings business depends on the balance across the portfolio.

Usually yes. The transfer is a disposal to a connected company, treated as made at market value even if you are paid little or nothing, so capital gains tax at 18% or 24% can arise on the gain. For UK residential property, the gain must be reported within 60 days of completion. Stamp duty land tax is also due on market value. Reliefs exist, such as incorporation relief, but they depend on the facts.

Usually, yes. Where a company buys from a connected person, the chargeable consideration is not less than market value, even if you take back shares or a loan. In England and Northern Ireland, companies pay the higher residential rates, and a 17% flat rate applies to a dwelling over £500,000 unless a relief such as for a property rental business applies. Wales and Scotland have their own taxes.

Incorporation relief defers the capital gain when you transfer a business as a going concern, with its assets, to a company for shares. The gain reduces the base cost of the new shares. It needs a genuine business, not just ownership of a few lets. HMRC accepts this where an individual spends 20 or more hours a week personally running the activities and considers less case by case. From 6 April 2026 you must claim it; it is no longer automatic.

Not entirely, but it can help. Where the portfolio is a real business and the numbers support it, incorporation relief can defer the gain. The idea is to move the properties into a company with incorporation relief, then build the family structure around that company, rather than paying capital gains tax on a straight transfer. It is not always the right route, and stamp duty land tax still needs planning. We work with our sister firm propertytaxadvisory.co.uk on incorporation before a family investment company is put in place.

No. The restriction on mortgage interest relief for residential lettings, with its basic-rate credit, applies to individuals, trustees and personal representatives. A company deducts its finance costs under the corporate loan relationship rules instead. That is one reason landlords with highly geared residential portfolios look at companies. It does not make a company the right answer on its own, because the other costs of moving property in and taking money out still count.

No. From 6 April 2027, individuals' property income is taxed at 22%, 42% and 47%. These new rates apply to income tax, not corporation tax, so a company's rental profit continues to be charged at the corporation tax rates. The change makes a company comparatively more attractive for landlords who would otherwise pay these rates, though it must be weighed against what you pay to move properties in and to take profits out.

No, not where the company mainly holds or lets property. Shares are not relevant business property if the business consists wholly or mainly of dealing in land or buildings or of making or holding investments. The £2.5m allowance for business and agricultural property from 6 April 2026 applies only where relief is available. Inheritance tax planning for property investors therefore relies on gifts and growth shares, not on Business Relief.

When an individual dies, the assets they own are revalued to market value for capital gains tax, wiping out the gain. That uplift does not extend to assets held inside a company: the company keeps its original base cost, though the shares themselves are uplifted. A property family investment company can therefore face tax on the growth if it later sells, which is a real cost to weigh against the inheritance tax saved.

It can. The annual charge applies to UK dwellings worth over £500,000 that a company holds, with bands rising to £303,450 a year for property over £20m from 1 April 2026. Relief is available for a property rental business, but it must be claimed on a return by 30 April each year. A family investment company letting expensive homes to unconnected tenants will usually qualify for relief, but still has to claim it.

It may be possible. Interest relief on a personal loan to buy shares in, or lend to, a close company is not available where the company is a close investment-holding company. A property family investment company letting commercially is not one, so relief may be available where the company lets property commercially, subject to the material interest conditions and the cap on income tax reliefs. The rules are technical, so we check each case before any borrowing is arranged.

Often, yes. Buying new properties through the company avoids the capital gains tax and the connected-party stamp duty charge that arise when you transfer existing ones, because you are not the seller. The company still pays stamp duty land tax on its own purchases at the rates for companies. Many families therefore keep existing property where it is and direct new investment into the family investment company, with funds lent or subscribed.

You could, but a gift of property to an adult child is a disposal at market value for capital gains tax, and you can lose control of it. It is a potentially exempt transfer for inheritance tax, so it falls out of the estate after seven years. A family investment company is different because you can keep the votes and decide when profits are paid, while the growth builds up for the children. Neither is always right.

The company pays corporation tax on the gain, not capital gains tax: 25% if it is a close investment-holding company, or 19% to 25% depending on its profits and associated companies. There is no annual exempt amount for companies, and no indexation allowance for growth after 2017. Individuals pay 18% or 24% with a £3,000 annual exempt amount, so the comparison depends on the gain and on how you plan to take the money out.

Through dividends on their shares, declared on separate share classes so the company can pay different amounts to different people. Adult children are taxed on dividends as their own income and can use their own allowances. For a minor child with shares from a parent, dividends above £100 a year are taxed on the parent. Many families therefore reinvest profits in the company and let the growth build for the children.

Sometimes, but only where a genuine partnership exists, and it is risky. On a transfer from a partnership to a connected company, stamp duty land tax is charged on market value less the connected partners' share. Joint ownership alone does not create a partnership, withdrawals within three years can be chargeable, and the general anti-avoidance rule applies to pre-planned steps. We would only discuss it after reviewing the facts of how the business is run.