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I live in England and have a flat in Scotland that I now want to rent out. I am a higher rates tax payer. What is my best option for maximising the money I keep after tax from this rental property? There are options like registering a company to manage the property, etc. besides just simple individual income.

Please note I am aware of all the risks of renting out a property. This question is purely about maximising the amount I keep.

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  • Do you have a mortgage on the property or is it owned outright? Also, how much of a capital gain would there be on the property if you sold it/transferred it into a company?
    – timday
    Commented Nov 1, 2020 at 12:15
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    @timday No mortgage. Owned outright. There would be virtually no capital gain at the moment.
    – Aleks G
    Commented Nov 1, 2020 at 12:16
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    The prevailing view at the moment (see websites like Property118, for example) is that if you already own just one property yourself, it's generally not worth transferring it to a company.
    – Steve Melnikoff
    Commented Nov 1, 2020 at 14:40

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The company route will mean you are taxed at 19% as it's likely to be a small company rather than the higher 25% corporate tax rate, that compares to your 40% personal tax rate. You'll have to pay accountancy fees to prepare the company acounts and file it's tax return which is likely to costs around £500 per year.

The bigger advantage is if you take out a mortgage as currently that is 100% tax deductable whilst if you keep the property as personal income only 25% is deductable.

Buy to let is still attractive as an option but only in certain circumstances.

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  • Your company may be taxed at 19%, but any money you transfer from the company to your personal use will be taxed at 40%, won't it?
    – DJClayworth
    Commented Dec 7 at 16:06

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