How is rented-out property taxed in a company?
Your company pays Corporation Tax on the profit it makes from renting property out. It is the same tax your company already pays on its other earnings, just worked out on the rent instead of on sales. You do not pay income tax on it, and the company does not pay it the way a person letting a flat in their own name would.
The figure that gets taxed is your rental profit: the rent that comes in, minus the real costs of letting the place out. If the costs are bigger than the rent in a year, you have a loss, not a profit, and there is no tax to pay on it for that year.
What counts as profit on the rent?
Start with the rent your company actually receives in the year. Then take off the everyday costs of running the let. What is left is the profit you pay tax on.
The usual costs you can take off:
- Letting-agent fees: what you pay an agent to find tenants and manage the property.
- Repairs and upkeep: fixing what is already there, like mending a broken boiler, repainting, or replacing a worn carpet with a similar one.
- Insurance: buildings and landlord insurance for the property.
- Mortgage interest: the interest part of your buy-to-let mortgage (not the bit that pays back the loan itself). Your company takes this off in full.
- Other running costs: ground rent, service charges, and the cost of getting a tenant out so you can re-let.
One thing you cannot take off the rent is the cost of improving the property, like adding an extension or fitting a brand-new better kitchen where there wasn't one before. Fixing something is a repair you can claim. Upgrading it to something better is an improvement, and that follows different rules. We sort which side of the line a cost falls on.
The big one: mortgage interest
You may have heard that landlords can no longer take their mortgage interest off the rent. That change hit people who let property in their own name, as individuals. It does not apply to your company.
When your company owns the property, the interest on the mortgage is a normal business cost, and your company takes the whole amount off the rent before working out the tax. This is one of the real differences between letting through a company and letting as a person, and it often works out in the company's favour.
A worked example
Say your company lets out one flat for a year.
| Rent received in the year | £14,000 |
| Letting-agent fees | -£1,400 |
| Landlord insurance | -£400 |
| Repairs (new boiler part, repainting) | -£1,200 |
| Mortgage interest for the year | -£6,000 |
| Rental profit the company is taxed on | £5,000 |
Your company pays Corporation Tax on the £5,000 profit, not on the full £14,000 of rent. Notice the whole £6,000 of mortgage interest came off. A person letting the same flat in their own name could not take all of that interest off, which is the part that catches people out.
Is rent kept separate from my company's other income?
Yes. Your rental profit goes in its own place on the company's tax return, apart from the money the company makes from its normal trade (the sales or services it sells). They are worked out separately and then both count towards the company's tax.
So if your company both trades and lets property, you do not just add the rent to your sales. The rent is its own pot, with its own costs taken off, and we keep the two apart for you.
How SimpleReturns handles it
Tell us the rent your company received and the costs of letting the property, or upload them, and we put the rental profit in the right place on your return, take off your mortgage interest in full, and keep it separate from your trading income. You see every figure before anything is sent.