When you sell property in a limited company, you’ll need to pay Corporation Tax on the profits. This is different from selling property as an individual, where Capital Gains Tax would apply.
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What tax do I pay when I sell property in a limited company?
Limited companies pay Corporation Tax on the gains made from selling property. The current Corporation Tax rate is 19% on profits up to £50,000, with higher rates for larger profits.
How is the taxable gain calculated?
The taxable gain is the difference between the sale price and the purchase price, minus any allowable expenses. These expenses can include:
• Costs of buying and selling the property
• Improvements to the property
• Legal fees and estate agent fees
What’s the difference between selling property in a limited company vs personally?
Here’s a quick comparison:
| Aspect | Limited Company | Personal Ownership |
|---|---|---|
| Tax Type | Corporation Tax | Capital Gains Tax |
| Tax Rate | 19% (up to £50,000 profit) | 18% (basic rate) or 28% (higher rate) |
| Tax-Free Allowance | None | £6,000 (as of 2024/25) |
Can I reduce the tax I pay when selling property through a limited company?
Yes, there are ways to minimise your tax liability:
- Offset losses from other property sales against your gains
- Claim all allowable expenses to reduce the taxable gain
- Consider selling the shares of the company instead of the property itself.
What about Stamp Duty Land Tax?
The buyer of the property will typically pay Stamp Duty Land Tax, not the seller. However, if you’re selling shares in a property-owning company, different rules may apply.
Do I need to report the sale to HMRC?
Yes, you’ll need to report the sale and pay any tax due through your company’s Corporation Tax return. This is usually due 9 months and 1 day after your company’s accounting period ends.
What if I want to extract the profits from the company?
If you want to take the profits out of the company, you’ll face additional tax. You could:
• Pay yourself a salary (subject to Income Tax and National Insurance)
• Take dividends (taxed at dividend tax rates)
• Consider other tax-efficient methods of extracting funds
Are there any reliefs available for selling property through a limited company?
Unlike personal property sales, there’s no equivalent to Private Residence Relief for companies. However, you might be able to claim Rollover Relief if you’re reinvesting the proceeds into another business asset.
What if the property is my main residence?
If the property is your main home and owned then there would not be any capital gains tax to pay!
How does selling property in a limited company affect my personal tax position?
Selling property through a limited company doesn’t directly affect your personal tax. However, how you extract the profits from the company will impact your personal tax situation.
Remember, tax laws can change, and everyone’s situation is unique. It’s always best to get professional advice tailored to your specific circumstances when dealing with property sales and tax matters.
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