The Tax Benefits of Investing in Property in the UK
When it comes to building long-term wealth, property investment remains one of the most effective and secure strategies available to UK investors. Beyond capital growth and rental income, one of the biggest advantages property offers is tax efficiency. By understanding and leveraging the UK’s property-related tax reliefs, allowances, and strategic structures, investors can unlock significant savings - ultimately enhancing net returns.
At O Johnston & Co, we specialise in sourcing high-performing property investments for high-net-worth individuals, ensuring that every acquisition is structured for maximum tax efficiency and optimal wealth creation.
In this guide, we’ll break down the key tax benefits of property investing in the UK and how working with a trusted partner can help you make the most of them.
1. Mortgage Interest Tax Relief (for Limited Companies)
While mortgage interest relief was largely reduced for individual landlords, savvy investors now structure their property portfolios through limited companies.
By doing so, you can:
Deduct 100% of mortgage interest costs from rental income
Reduce your overall corporation tax liability
Protect personal income from being pushed into a higher tax bracket
For high-end investors, this strategy is particularly effective, as it keeps cash flow strong while maximising profitability. At O Johnston & Co, we work diligently to ensure each property acquisition is structured to optimise your net returns.
2. Capital Gains Tax (CGT) Planning
When you sell an investment property, Capital Gains Tax (CGT) applies to the profit made on the sale. However, with smart planning, there are ways to minimise or defer this liability:
Annual CGT Allowance – Each individual has an annual tax-free allowance (currently £3,000 for the 2025/26 tax year).
Spousal Transfers – Assets can be transferred between spouses or civil partners tax-free, effectively doubling allowances.
Corporate Structures – Selling via a limited company can reduce exposure, as corporation tax rates are often lower than personal CGT rates.
We help our clients work alongside specialist tax advisers to design exit strategies that minimise liabilities when it’s time to sell.
3. Tax-Deductible Expenses
Owning an investment property comes with costs - but many of these are fully deductible, reducing your overall tax bill. Some allowable expenses include:
Letting agent and property management fees
Maintenance, repairs, and essential upgrades
Insurance premiums
Council tax and utility bills (for periods when the property is vacant)
Professional fees, including legal and accounting services
By offsetting these costs, you can significantly increase your rental yield and improve portfolio profitability.
4. Inheritance Tax (IHT) Planning
High-net-worth individuals often see property investment as a way to protect wealth for future generations. However, without proper planning, your estate could be hit with Inheritance Tax at 40%.
Strategic property structuring can help:
Using trusts and corporate vehicles to manage property assets
Gifting property shares gradually over time
Leveraging Business Property Relief (BPR) where applicable
At O Johnston & Co, we guide our clients through these considerations, working alongside trusted tax partners to build long-term strategies that safeguard family wealth.
5. Depreciation & Refurbishment Allowances
Investing in properties that require refurbishment or redevelopment can unlock substantial tax advantages. Under certain circumstances, you can:
Offset refurbishment costs against rental income
Claim capital allowances for fixtures and fittings
Reduce overall taxable profits while improving the property’s capital value
This makes value-add property investing highly attractive, as you not only increase the asset’s worth but also enhance tax efficiency.
6. Short-Term Rental & Furnished Holiday Let (FHL) Relief
For investors diversifying into short-term rentals or holiday lets, there are additional tax benefits, including:
Full deduction of mortgage interest costs
Additional capital allowance claims on furnishings and fittings
Potential eligibility for Business Asset Disposal Relief, reducing CGT to just 10% on qualifying gains
With the rise of serviced accommodation and luxury holiday rentals, this strategy is becoming increasingly popular among high-end investors seeking high-yield opportunities.
7. Why Work with O Johnston & Co
Navigating the UK’s property tax landscape requires more than just understanding numbers - it demands strategic insight, access to opportunities, and smart structuring. That’s where O Johnston & Co comes in.
Our role is to:
Source high-performing, tax-efficient properties tailored to your goals
Partner with trusted accountants and tax specialists for bespoke planning
Optimise portfolio structures to maximise returns and minimise liabilities
Provide off-market opportunities that enhance both income and capital growth
We don’t just find properties - we deliver complete investment solutions designed for long-term success.
Final Thoughts
Property remains one of the most tax-efficient wealth-building tools in the UK - if approached strategically. By understanding the available allowances, leveraging corporate structures, and selecting the right properties, investors can significantly reduce liabilities and enhance returns. Outside of investing directly in physical property learn about other tax benefit strategies here.
At O Johnston & Co, we help our clients unlock the full potential of property investing by combining market intelligence, tax efficiency, and bespoke strategies tailored to high-end portfolios.
If you want to explore tax-efficient property investments that deliver both short-term income and long-term growth, we’re here to help.
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