How are legislative and tax developments reshaping property ownership structures?

A reflection

Choosing the right structure for a property portfolio—whether through individual ownership, a partnership, or a Company—can significantly affect a landlord’s tax liabilities, legal protections, and long-term financial planning. Each structure comes with distinct benefits and challenges that depend on your objectives for ownership. Recent proposed legislative changes, such as the Renters’ Rights Bill and an increase to Stamp Duty Land Tax (SDLT) in the Autumn Budget 2024, add further layers of complexity. These developments may lead landlords to question whether it’s prudent to continue renting out properties given current market conditions, or if selling is perhaps a more suitable option.

This article will explore three key areas.:

In the first part, we cover the different types of structures landlords can use to hold property, alongside the tax and compliance implications and the considerations for moving between these structures.
In the second part, we analyse the potential impact of the Renters’ Rights Bill on landlords and their portfolios.
In the third part, we will explore how the SDLT surcharge change could further influence property ownership strategies.
Finally, our closing thoughts will combine the separate parts of this blog to create an overview of different ways landlords can structure their portfolios and the impact new legislative and tax developments may have on the way landlords hold property.

Part 1: What are the different ways property can be held?

Individual ownership

Individual ownership, including joint ownership (commonly with a spouse or family member), is often the simplest and most common way to hold property. It is usually seen with residential buy-to-let properties. This straightforward option often suits smaller-scale landlords who prioritise ease of management and use of profits.

Partnership

A partnership involves two or more individuals carrying on a business with a view to profit and is therefore a more commercial version of joint ownership. Unlike simple joint ownership, HMRC expects genuine partnerships to meet specific requirements, including maintaining partnership accounts, submitting partnership tax returns, and documenting agreements through partnership deeds and meeting minutes. This adds a layer of formality and transparency, which can have advantages for record-keeping and tax efficiency.

Limited Liability Partnerships (LLPs) are also common choices for holding and managing property portfolios and can provide limited liability protection to members. LLPs must file annual accounts with Companies House, unlike general partnerships.

Limited Partnerships (LPs) may also be used as a limited liability investment vehicle.

Company

Holding properties through a limited company has become increasingly popular, especially since changes in the tax rules from 2017/18 limited the benefits of mortgage interest deductions for individual landlords. A Company pays Corporation Tax (CT) on profits, which can sometimes be more advantageous compared to income tax rates that apply to individuals or partners. However, extracting profits from a Company—whether as dividends or through other means—can incur additional taxes, making this structure potentially less suitable for landlords needing immediate access to rental income.

Trends in property portfolio structures

The tax change typically referred to as Section 24 reduced the ability to fully deduct mortgage interest against rental income, particularly impacting higher-rate and additional-rate taxpayers. This change sparked a trend of landlords transitioning to corporate structures, as companies can still fully deduct mortgage interest when calculating taxable profits (unless such costs exceed £2m). Despite this, individual ownership remains popular for smaller landlords due to its simplicity.

What are the tax implications of property held individually, in partnership, and in a Company?

Tax on profits

Individual and partnership structures involve paying income tax on a share of the profits at the taxpayer’s applicable rate. In contrast, companies pay CT which is often at a lower rate of between 19% and 25%, though accessing these profits comes with its own tax implications.

Tax on sale

When a property held by an individual or partnership is sold, Capital Gains Tax (CGT) is due on any gains. For properties held in a Company, the sale will attract CT but further taxes may apply if the proceeds are distributed to shareholders.

What are the tax implications of transitioning between structures?

Moving from an individual or partnership structure to a Company can trigger significant tax liabilities, particularly through CGT and Stamp Duty Land Tax (SDLT). When transitioning, the properties are considered as being sold to the Company at market value, which can result in substantial CGT and SDLT charges.

There are tax reliefs available that can mitigate these costs, but they come with strict conditions. Failing to meet these requirements could lead to a large and unexpected tax bill, so it’s crucial to seek advice before making any structural changes. Additionally, landlords must adhere to tight deadlines for paying these taxes—CGT is due within 60 days of the sale, while SDLT must be paid within 14 days.

What are non-tax reasons for transitioning to a Company structure?

There are non-tax reasons why landlords might choose a Company structure. Limited liability can shield landlords from personal exposure to legal risks, making Company ownership attractive for those wanting enhanced legal protection. Additionally, Company structures offer greater flexibility in estate planning. Shares in the Company can be transferred incrementally, which is practically easier to do than transferring a fractional interest in a property.

Compliance obligations for individual, partnership and Company structures

Compliance is generally simplest for individual ownership, with landlords only needing to declare rental income on their personal tax returns. Partnerships require an additional partnership tax return (and in the case of LLPs filing annual accounts with Companies House), while Companies face additional obligations, including filing annual accounts with Companies House, submitting iXBRL compliant accounts to HMRC and adhering to corporate governance standards. This increased compliance burden is an important factor for landlords considering the shift to a Company structure.

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Part 2: The impact of the Renters’ Rights Bill on landlords

The Renters’ Rights Bill, currently under parliamentary consideration, has the potential to significantly reshape the rental market. The proposed changes aim to strengthen tenant protections, but they also place additional obligations on landlords, potentially altering the economics of property letting.

For smaller landlords, the Bill’s added compliance requirements could prove burdensome, possibly prompting them to exit the rental market. Many may opt to sell their properties rather than face the increased administrative responsibilities, especially if they only hold one or two properties. This trend could lead to a reduced supply of rental properties, which might, in turn, drive rents higher. It is important to note however, that under the new Bill landlords will only be able to increase rents once per year, and that the abolishment of Section 21 of the Housing Act 1988 will enable tenants to challenge what they believe to be unfair rent increases.

Larger landlords, however, may find an opportunity to adapt through incorporation. The benefits of a corporate structure—including limited liability and the ability to streamline portfolio management—may make it easier for professional landlords to navigate the new regulations. Additionally, for landlords considering gifting shares in property as part of their estate planning, the impact the Renters’ Rights Bill may have generally on the rental market may be the catalyst to transition to a Company. As the Bill advances, all landlords must remain informed and proactive to ensure compliance while maintaining profitability.

With mounting tax and regulatory pressures on individual landlords, there is a possibility that more properties will be held in corporate structures in the future. However, the mortgage market has not fully adapted to this shift. Mortgage considerations are also affected by the choice of structure. The mortgage market has been slower to adapt to the growing preference for Company ownership, with rates often less favourable than those for individual borrowers. This discrepancy could deter landlords from incorporating, especially given the relatively higher costs associated with corporate borrowing.

Nonetheless, with growing regulatory and tax pressures, the long-term benefits of incorporation—particularly for those with multiple properties—may outweigh these initial disadvantages.

Part 3: The impact of the SDLT surcharge for landlords

The Autumn Budget 2024 was held on 30 October and introduced an immediate increase to rates of CGT for all assets except residential property. Previously other assets were subject to CGT at 10% or 20% upon sale (the rate mix being determined by the disposer’s level of income), and these have now been brought into line with residential property rates of 18% and 24%. In recent years, residential property was disadvantaged from a CGT perspective but the playing field has been levelled, at least for now.

Any future rise in CGT could substantially affect landlords’ decisions regarding property sales, restructuring portfolios, or even exiting the market. Higher CGT rates could lead to fewer transactions, with landlords holding properties longer to avoid higher tax liabilities. This may also impact overall liquidity in the property market, and professional advice will be crucial in helping landlords navigate these potential changes.

The rates of CT were not affected by the Budget, meaning that decisions to sell for corporate landlords may be less impacted than individuals, subject to whether the shareholders wish to extract the profits.

The Autumn Budget did however increase the SDLT surcharge rate for residential property, for purchases from 31 October 2024. Prior to this date, residential property purchases caught by the ‘additional rate’ were subject to an additional 3% SDLT and this has increased to 5%. This catches most property purchases, other than those where first time buyers are purchasing their home, or existing home-owners are moving to a new house to be used as their main home.

As a further provision for companies (and other non-natural persons such as partnerships with corporate members), acquisitions of residential property above £500,000 have attracted an initial charge of 15%, unless it is used for certain business purposes. The Budget increased this rate to 17%, also from 31 October 2024.

The rates for transactions with an effective date between 31 October 2024 and 31 March 2025:

Relevant consideration	Percentage
Not exceeding £250,000	5%
£250,001 to £925,000	10%
£925,001 to £1.5 million	15%
> £1.5 million	17%

The Autumn Budget’s SDLT increases could have significant implications for landlords assessing their property ownership structures. With the additional SDLT surcharge on residential purchases now at 5% and a potential 17% charge for corporate acquisitions over £500,000, the SDLT increases will heavily influence acquisition and restructuring decisions and may deter some individual landlords from expanding or shifting properties into new structures.

For those looking to move to a corporate structure, however, the tax benefits associated with corporate ownership can help offset SDLT costs when transactions are carefully structured and held for long-term rental purposes.

There are still ways landlords can mitigate SDLT’s financial impact, although the increased initial cost may necessitate a longer holding period to achieve worthwhile returns.

Ultimately, the immediate increases in SDLT surcharges reshape the landscape for landlords, reinforcing the need for professional advice to assess whether the corporate route aligns with their tax and growth objectives over the long term.

Closing thoughts

In light of recent legislative and tax changes, landlords face complex decisions about how best to structure their property holdings. The Renters’ Rights Bill coupled with SDLT increases from the Autumn Budget 2024 introduce new considerations that may influence whether landlords choose to expand, restructure, or exit the market altogether. For some, holding property in a Company could provide certain tax efficiencies over the long term, but this may require careful planning to offset initial SDLT costs.

Each form of ownership offers distinct tax and legal implications that impact both short- and long-term financial outcomes. As the regulatory landscape continues to evolve, it’s essential for landlords to weigh these options thoughtfully, ensuring their portfolios remain resilient and aligned with their personal and financial goals.

At Price Bailey, our Tax team experts can support you in navigating these choices and understanding the implications of each type of ownership. For landlords with long-term growth objectives, evaluating the balance between regulatory demands and financial goals will be key to determining the best path forward. Whatever your reasons for adapting to the market, informed decisions today will help you safeguard your investment and align with future market shifts.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.