When you are new to dealing with business activity through a limited company in the UK, you enquire, ‘Do limited companies pay capital gains tax on property?’. Well, unincorporated associations and limited companies are not liable to pay capital gains tax. However, the corporation tax is paid under certain business circumstances, which is another kind of tax payment. Capital gains tax in the UK. This is also one of the essential tasks for business owners to understand the difference between different taxes to be aware of what they owe in tax for running their business through limited companies in the UK. We have designed this comprehensive discussion to answer your queries like ‘Do limited companies pay capital gains tax on property?’. You can gather more information on this by continue reading this blog.

Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help with your accounting queries.

Overview of Capital Gains Tax

Capital gains tax is also denoted as CGT in the UK. This is a common type of tax that a few businesses pay for carrying out business activities in the UK. Business structures like partnerships also come under the liability of paying capital gains tax in this regard. Moreover, individuals who sell out their assets for more than a certain limit will also become liable to pay capital gains tax. This property category is a second home which is not used as your main home. Also, inherited properties like jewellery or other antiques come under the liability of capital gains tax. Inherited cars or vehicles are not included in this tax obligation, though. Also, consider the business assets, which include the landmark, business building, and other relevant features etc.

How Do Limited Companies Pay Tax on Property Profits?

Limited companies pay corporation tax on their taxable profits, which includes profits made from property rental income. The corporation tax rate for the 2024-2025 tax year is 19% for small profits and 25% for ring-fenced profits. However, the corporation tax rate will increase to 25% for all profits. The taxable profits of a limited company are calculated by deducting allowable expenses from the gross rental income. Allowable expenses include mortgage interest, property maintenance and repairs, insurance premiums, letting agent fees, and other expenses related to the property.

Limited companies can also claim capital allowances on qualifying expenditure related to the property, such as furniture and fittings, equipment and machinery, building alterations and improvements. The limited company must pay the tax due within a certain time before the end of the accounting period. Interest and penalties may be charged if the payment is late. For example, let’s say a limited company has a gross rental income of £100,000 and allowable expenses of £50,000. The taxable profits would be £50,000, and the tax due would be £9,500 (19% of £50,000).

Do Limited Companies Pay Capital Gains Tax on Property?

As mentioned earlier in the discussion, if you earn profits from a property in the UK as a sole trader or as a partnership, you will pay capital gains tax. However, in the business structure like limited companies in the UK, they pay only corporation tax on selling the assets and earning profit from it. Capital gains tax is not an issue for limited companies, and it is normally associated with small business setups in the UK.

What is the Difference between CGT and CT on Property Profits?

Generally, the role of capital gains tax and corporation tax is similar as they are taxed on the profits that individuals or companies get after carrying out business activities in the UK. However, the flexibility factor is more when it comes to capital gains tax and its relevant rates than corporation tax. Businesses run with company structures in the UK normally come under the obligation of corporation tax. However, other business structures like partnerships and sole traders pay capital gains tax on the profits they earn from their business activities.

All type of business owners needs to be aware that they are liable to pay when it comes to taxes in the UK. This will help them to maintain the records accordingly. Small businesses tend to manage the records on their own, but when it comes to larger businesses or companies, they hire accountants or outsource their jobs to another accounting firm.

The Bottom Line

In conclusion, individuals carrying out business activities often ask, ‘Do limited companies pay capital gains tax on property in the UK?’. Normally, capital gains tax is for individuals who are running a business by being a sole trader or working in a partnership. When it comes to a limited company in the UK, capital gains tax is not a salinity for this business structure. However, if you still need further guidance to be well aware of the capital gains tax or other tax liabilities, you are welcome to get in touch with your team of experts, and they will help you to get things through.

Reach out to our intelligent and clever-minded guys to get the answer to your queries in the UK, we will get to your answers quickly. We will help to decide how to deal with your tax implications.

Disclaimer: The general information provided in this blog about whether do limited company pay capital gains tax on property includes text and graphics. It does not intend to disregard any of the professional advice in the future as well.