SPV vs Personal Ownership: Tax and Liability Trade-Offs

Since Section 24 restrictions on mortgage interest deductibility (phased 2017-2020), many UK landlords have moved property into Special Purpose Vehicles (SPVs) — limited companies created specifically to hold rental property.

The Core Trade-Off

Personal ownership: Rental income taxed at marginal income tax rate (20/40/45%), mortgage interest not fully deductible post-Section 24.
SPV ownership: Rental profit taxed at corporation tax (25% for profits >£250k, 19% below), mortgage interest fully deductible.

When SPVs Make Sense

✓ You're a higher-rate taxpayer (40%+)
✓ You have significant mortgage debt (Section 24 impact is severe)
✓ You plan to retain and reinvest profits (not extract as income)
✓ You're building a multi-property portfolio
✓ You want liability protection

When Personal Ownership is Better

✓ You're a basic-rate taxpayer (20%)
✓ Properties are unmortgaged or low LTV
✓ You need to extract income regularly (dividends are taxed)
✓ You plan to sell soon (CGT can be more favorable than corp tax + dividend tax)

The Exit Tax Trap

SPVs face double taxation on exit: corporation tax on sale proceeds, then dividend/income tax when extracting cash. Personal ownership pays CGT once (10-28% depending on rate and annual exemption).

However, if you're never planning to sell and want to build generational wealth, SPVs allow tax-efficient profit retention and reinvestment.

Practical Considerations

• SPV setup costs: £500-£2,000 (legal + accountancy)
• Annual compliance: £1,000-£3,000/year in accountancy fees
• Mortgage rates: Slightly higher for SPVs (0.2-0.5%)
• Stamp duty: 3% surcharge applies to both structures

Run the numbers with your accountant. 1st Numbers models tax position across personal and SPV structures, showing projected liabilities under different scenarios.