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Published: February 2026 | by Admin
When you invest in property, one thing you should know is that how you own it matters more. This is where an SPV often comes into play.
An SPV, or Special Purpose Vehicle, is a limited company set up purely to buy and hold investment properties. It doesn’t trade in anything else, which makes things clearer for lenders, accountants, and HMRC. Many buy-to-let investors use SPVs when they plan to grow a portfolio or reinvest rental profits.
Understanding how tax is applied within an SPV is essential before assessing whether it improves rental income efficiency.
When property is owned by an SPV:
Rental income is treated as company income
Allowable expenses are deducted
The remaining profit is subject to Corporation Tax at 19%
This differs from personal ownership, where rental profits are added to an individual’s income and taxed at their marginal income tax rate.
Corporation Tax rates and thresholds may change over time, so investors should always consider current legislation when planning.
One of the most discussed aspects of SPV property tax in the UK is the treatment of finance costs. In many cases, mortgage interest and related costs can be deducted as a business expense when calculating company profits.
For some investors, this results in a clearer alignment between rental income and taxable profit. However, the benefit depends on borrowing levels, interest rates, and overall profitability.
The choice between SPV and personal ownership affects how tax is applied throughout the investment lifecycle.
When property is owned personally:
Rental income is taxed at income tax rates
Relief on mortgage interest is restricted to 20% of the tax credit, which would then be adjusted against the final tax bill.
Higher-rate taxpayers may see a greater tax impact
Capital Gains Tax (CGT) applies on the sale at personal rates
Personal ownership is often simpler and may still be suitable for smaller portfolios or lower-rate taxpayers.
With SPV ownership:
Rental profits are taxed under Corporation Tax rules
Profits can be retained within the company
Personal tax usually arises only when money is extracted from the company in forms of salary, dividend or any other personal drawings.
CGT rules differ when property is sold by a company
This structure can provide greater flexibility, but it also introduces additional layers of taxation when profits are withdrawn.
SPVs do not increase rental income directly. Any potential benefit comes from how income is taxed and managed, rather than from higher rent levels.
For some investors, SPV ownership can result in improved post-tax cash flow, particularly where profits are retained within the company. However, once profits are extracted, additional personal tax applies, which may reduce the overall benefit.
This is why SPVs are often more suitable for investors focused on reinvestment rather than immediate income.
One commonly cited advantage of SPVs is the ability to retain profits within the company. Retained profits can be used for:
Future property purchases
Deposits and associated costs
Portfolio expansion over time
This approach can support long-term planning, but it requires disciplined financial management.
Tax efficiency should always be weighed against practical considerations.
Setup Costs and Ongoing Compliance
Operating an SPV involves additional responsibilities, including:
Company formation and registration
Annual accounts and Corporation Tax returns
Ongoing bookkeeping and reporting
Professional accountancy fees
These obligations are manageable but should not be overlooked.
There is no universal answer to whether an SPV is the right structure. Suitability depends on factors such as:
Your personal tax position
Portfolio size and growth plans
Borrowing requirements
How rental income is used
Individual ownership is generally more advantageous until landlords transition into a lower tax bracket, as paying tax at the reduced corporate rate is preferable to incurring the higher individual tax rate.
Understanding SPV property tax is only the starting point. Applying it correctly requires careful consideration of tax rules, lending criteria, and long-term objectives.
At Galaxy Financials, we help property investors assess whether an SPV structure is appropriate for their individual circumstances. Our approach is practical, compliant, and focused on helping you make informed decisions that support sustainable rental income and portfolio growth.