Do property companies qualify as micro-entities?
Most small property companies and single-property SPVs are within the micro-entity size limits and can use the regime.
A few types of company are excluded from the micro-entities rules, so it is worth confirming yours is not in an excluded category — our micro-entity guide explains the limits and exclusions.
How investment property is treated
Under FRS 105, investment property is measured at cost less depreciation, not revalued to fair value each year.
That makes the accounts simpler than under other standards: there are no annual valuations to obtain and no fair-value movements to account for.
Rental income and Corporation Tax
Your company’s rental profit is subject to Corporation Tax. Running costs — letting fees, repairs, insurance and similar — are deductible against that profit.
Mortgage interest is relieved in full — a company escapes the restriction individual landlords face, and that is one of the main reasons people hold property through a company. It is relieved in a different place from the letting costs, though, and that is what catches people out: see the next section.
Where mortgage interest actually goes
This one surprises people, so it is worth being exact. Letting costs — agent fees, repairs, insurance, ground rent — come off the rent to give the property business profit. Mortgage interest does not.
For a company, interest on a loan is a loan relationship debit (Part 5 of the Corporation Tax Act 2009). It is relieved against the company’s total profits rather than deducted in arriving at the rental profit, so it sits on its own line below the property figure instead of inside it.
The relief is just as good and the tax usually identical. But it means a company with rent of £73,000, letting costs of £18,000 and mortgage interest of £46,000 shows a property profit of £55,000 and a separate interest deduction of £46,000, leaving £9,000 — rather than one £9,000 rental figure. Where the interest exceeds everything else, the excess is a non-trading deficit and can be carried forward.
No capital allowances inside a let dwelling
Furniture, carpets, white goods and similar inside a dwelling you let do not qualify for plant and machinery allowances — section 35 of the Capital Allowances Act 2001 blocks the claim.
Allowances remain available on plant used outside the dwelling, in the common parts of a block, and on equipment used to run the business itself.
What you file each year
A CT600 with accounts and a tax computation to HMRC, micro-entity accounts to Companies House, and a confirmation statement to Companies House.
If the company did not trade or receive rent during the year, it may be dormant — see our dormant company guide.
OneFiler files the CT600 and micro-entity accounts for small companies directly to HMRC and Companies House, property companies included.
Selling a property: chargeable gains
When the company sells a property, the gain — sale proceeds less the original cost, purchase and selling costs, and capital improvements — is charged to Corporation Tax alongside the rental profit. Companies have no annual exempt amount: the whole gain is taxable.
For property bought before December 2017, indexation allowance still applies up to that month: the cost is uplifted by inflation from purchase to December 2017, and the frozen allowance reduces the gain. Bought later, there is no indexation at all.
The gain goes in Box 210 of the CT600, computed before it is entered — the return asks for the gain, not the sale price.
Loss years: what happens to a property loss
A year where letting costs exceed rent produces a UK property business loss. It is set automatically against any other profits of the same year — interest, gains — and whatever is left carries forward without time limit, usable against the company’s total profits in later years.
Losses do not expire. The commonly repeated “two year” limit is the deadline for certain claims, not the life of the loss.
If the company has never yet had a tenant, the year’s costs are not a loss at all: they are pre-commencement expenditure, deductible in the period the first let begins (HMRC manual PIM2505).
ATED: the extra return for dwellings worth over £500,000
A company holding a UK dwelling valued over £500,000 must file an Annual Tax on Enveloped Dwellings return every April — separate from the CT600 and from the accounts, and due even when a relief (such as letting to unconnected tenants) reduces the charge to nil, because the relief must be claimed on the return.
This is the most commonly missed filing for small property companies, and late-filing penalties accrue daily. If your company’s dwelling is worth more than £500,000, put the ATED return in the calendar for April — OneFiler does not file ATED returns.