Extracting profits from a property company

Usually, first repay any money you've lent the company, because that comes back to you tax-free. After that, most landlords use a mix of dividends, sometimes a modest salary, interest on loans to the company and employer pension contributions. The right mix depends on your other income, which tax bands are free, whether you need the cash now and how much you want to leave in the company to repay debt or buy more property.

Yes. If you've put money into the company as a loan, for example a deposit, or you were credited with a loan when you transferred properties, the company can repay it at any time without tax, as long as it has the cash. That's why we often recommend lending deposits rather than subscribing for shares, and why the loan account balance is worth keeping accurate.

The first £500 of dividends each year is covered by the dividend allowance. Above that, dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. Dividends are paid from profits after corporation tax, so the combined rate on profit taken out as a dividend is higher than either figure alone. Dividend rates aren't changing in April 2027.

If you borrow from your close company and the loan isn't repaid within nine months after the end of the company's accounting period, the company pays a temporary tax charge. For loans made on or after 6 April 2026, the rate is 35.75%, matching the dividend upper rate. The tax is reclaimable once the loan is repaid, but anti-avoidance rules stop you clearing the loan and quickly re-borrowing.

It can, and a salary is a deductible expense for the company if it's paid wholly and exclusively for the business and is reasonable for the work done. Directors who manage the portfolio actively are in a stronger position than passive ones. Employer National Insurance is 15% above £5,000 a year in 2026/27, so many landlords keep salaries modest, often to protect state pension entitlement.

Yes. Employer pension contributions are generally deductible for the company if they're wholly and exclusively for the business, and they aren't taxed on you as income. They count towards your annual allowance, normally £60,000 a year but lower for very high earners. From April 2027 most unused pension funds come into your estate for inheritance tax, which changes the long-term picture for some landlords.

It can be worthwhile. Interest at a commercial rate is deductible for the company and is savings income for you, which may be covered by your personal savings allowance or taxed at your savings rates. A company paying yearly interest to an individual normally has to deduct income tax at source and report it to HMRC. Savings rates rise by 2% from April 2027, which narrows the advantage for higher-rate lenders.

If you don't need the money, often yes. Profits kept in the company have only borne corporation tax, so more is left to repay mortgages or fund the next purchase. Over a decade the difference compounds. The trade-off is that the value builds up in the company, and eventually in your estate, so retaining profits works best alongside an inheritance tax and succession plan.

Common approaches are drawing down a director's loan, paying dividends spread across years and family members to use lower bands, using pension savings built up through employer contributions, or selling properties and winding the company up. A company wound up through a formal liquidation usually pays out as capital, taxed at capital gains rates, subject to anti-avoidance rules. Planning a few years ahead gives the most options.

It can be, because distributions in a formal liquidation are usually taxed as capital gains at 18% or 24%, not as dividends at up to 39.35%. But the company first pays corporation tax on gains when it sells properties, and anti-avoidance rules can tax the distribution as income if you carry on a similar activity afterwards. Business Asset Disposal Relief isn't normally available for an investment company.

Yes, if they own shares. Adult children with their own shares can receive dividends taxed at their own rates, which can be much lower if they're students or early in their careers. Different share classes let the company pay dividends to some family members and not others. The shares must be genuinely theirs, and gifting shares can have capital gains and inheritance tax consequences, so the set-up needs care.

If your spouse or civil partner genuinely owns shares, dividends on those shares are taxed on them. That can use a lower tax band. HMRC can challenge arrangements under the settlements rules, for example where shares carry only the right to income, though outright gifts of ordinary shares between spouses are generally protected. Simple ordinary shares with full rights are the safest route.

It can make the payment, but it isn't free money. Any personal cost the company pays for you has to be treated as a dividend, salary or a withdrawal from your director's loan account. If the company owes you money, it can simply reduce that balance. If not, your loan account goes overdrawn, which can mean a section 455 charge for the company and possibly a taxable benefit for you. Decide the route before the money moves.

If you draw money that isn't covered by a dividend, salary or repayment of your own loan, your director's loan account becomes overdrawn. That can trigger the section 455 charge for the company if not repaid in time, and a taxable benefit for you if the loan is large and interest-free. Dividends can only be paid from distributable profits, so an illegal dividend may have to be repaid.

Refinancing puts cash into the company, not into your pocket. Borrowing against company properties isn't taxable for the company, but getting that cash to you still needs a route: repayment of a director's loan, a dividend or salary. If the company owes you money, a refinance can fund repaying it. Otherwise refinancing mainly funds more purchases, which is how many companies grow.