Personally owned property: key tax points directors shouldn’t overlook (UK)
It’s common for directors to own property outside the company; a buy-to-let, a holiday let, or a second home they occasionally rent out. Because it’s held personally, the tax sits with you (not the business), and a few predictable “gotchas” catch directors out year after year.
1) Rental income: it’s the profit that’s taxed, but not all costs work the way you think
You’ll typically pay Income Tax on your rental profits: rental income less allowable expenses. The usual deductible running costs include things like letting agent fees, landlord insurance, repairs and maintenance (not improvements), safety certificates, accountancy fees relating to the property, and replacement items in many cases (for example, replacing a like-for-like domestic item rather than the initial purchase).
Mortgage interest is the big one: for residential property, finance costs aren’t deducted in full from rental income. Instead, you generally get a basic rate (20%) tax credit on the interest element (and certain related finance costs). This often increases the tax bill for higher- and additional-rate taxpayers.
If your gross property income is modest, remember the £1,000 property allowance. It can simplify things, but it’s not always best if your actual expenses are higher (and it can’t create a loss).
2) Record keeping: “tidy enough” isn’t enough anymore
Good records aren’t just for the accountant, they protect you in enquiries and help you claim everything you’re entitled to. Keep invoices, mileage logs (if relevant), statements, and notes explaining anything borderline (e.g., why you treated work as a repair, not an improvement).
Also, Making Tax Digital for Income Tax is being phased in. From 6 April 2026, landlords with qualifying income over £50,000 will need to keep digital records and send quarterly updates using compatible software.
3) Planning to sell soon? Think Capital Gains Tax early, not at completion
If you sell a personally owned property that isn’t fully covered by main residence relief, you may have Capital Gains Tax (CGT) to pay. For UK residential property disposals, the CGT rates are 18% and 24% depending on your income position, and the annual CGT exemption for 2025/26 is £3,000.
Crucially, where CGT is due on a UK residential property sale, you generally must report and pay within 60 days of completion via the UK property reporting service — separate from (and in addition to) your Self Assessment process.
4) Directors’ “extras”: company involvement can create tax headaches
If your company pays personal property costs, uses the property, or you charge rent to the company, you can trigger benefits-in-kind, income tax reporting, or messy “mixed use” apportionments. Keep the boundary clear and document any agreements.
Bottom line: treat your personally owned property like a mini-business: track income and expenses properly, understand the mortgage interest restriction, and plan ahead for CGT and deadlines, especially if a sale is on the horizon.
Need help with tax returns?
This blog is general information, not tailored tax advice. Speak to a professional about your specific circumstances.
Further reading:
What Is Capital Gains Tax and Who Has to Pay It? | Blue Rocket
22 Of The Most Forgotten About Expenses For Property Businesses | Blue Rocket
Making Tax Digital for Self‑Assessment: Are You Ready For 2026? | Blue Rocket
