Property has long been at the heart of wealth preservation in the UK. Families have traditionally viewed bricks and mortar as both an investment and a legacy, offering stable rental income, long-term capital growth, and tangible value that can be passed across generations. But as tax policy evolves, owning property, particularly within family groups—has become more complex.

In 2025, tax efficiency is no longer an afterthought. For families running property portfolios, tax can be the single largest cost over time, often outweighing interest expense. Stamp Duty Land Tax (SDLT), corporation tax, capital gains tax (CGT), and inheritance tax (IHT) all play roles in determining whether portfolios thrive or erode.

This blog examines how families can think about structuring their property ownership to achieve greater tax efficiency. Importantly, it avoids giving tax advice, families should always seek professional guidance. Instead, the aim is to highlight the key issues, explore how different structures interact with borrowing, and point to strategies that combine tax awareness with lender flexibility.

Why Tax Efficiency Matters for Families in 2025

Tax has become a growing burden for landlords and property-owning families. Interest relief restrictions for individuals, higher SDLT surcharges on additional properties, and tougher rules on capital gains have increased the cost of holding property directly.

Meanwhile, inheritance tax remains a major consideration for wealthy families. As explored in Inheritance Tax Planning with Whole of Life Policies, many families are looking for ways to offset the tax burden that arises when passing assets down generations.

The result is that families are increasingly looking at ownership structures—from limited companies to trusts—to mitigate tax liabilities. But every structural choice affects borrowing power, governance, and succession planning.

Personal Ownership vs. Corporate Structures

For many families, the question is whether to own property personally or through a corporate vehicle such as a limited company or special purpose vehicle (SPV).

Personal ownership keeps things simple. Properties are registered in individual names, rental income flows directly, and tax is paid via self-assessment. But it has major drawbacks in 2025. Interest relief restrictions mean families cannot offset mortgage interest fully against rental income, increasing tax bills. Higher rate taxpayers can find themselves paying far more than expected.

Limited company ownership, by contrast, allows mortgage interest to be fully deductible before corporation tax is applied. This can make gearing more efficient. Companies also allow profits to be retained for reinvestment rather than taxed immediately at personal rates. Families with growth ambitions often find this structure attractive.

However, companies bring their own costs. SDLT can apply on transfers, corporation tax has increased, and extracting profits via dividends or salaries introduces additional layers of taxation. Lenders may also apply different affordability tests for company structures compared to personal ownership, sometimes requiring personal guarantees from directors.

We explored these trade-offs in more detail in SPVs vs. Trading Companies: What Landlords Must Know in 2025. For families, the choice often comes down to balancing simplicity with scalability.

The Role of Trusts

Trusts remain a popular vehicle for families focused on succession planning. As covered in Family Trusts and Borrowing Power, they help preserve assets for future generations, provide governance, and in some contexts mitigate inheritance tax.

From a tax perspective, trusts can be useful for controlling when and how income reaches beneficiaries. They may also help ring-fence assets from certain liabilities. But trusts are not without their challenges. Complex reporting, ongoing tax charges, and reduced lender flexibility mean they must be used with care.

Lenders often require personal guarantees even when trusts hold property. Families must weigh the governance benefits against potential restrictions on borrowing.

Debt, Tax, and Efficiency

Debt is both a tool and a complication in tax planning. Well-structured borrowing can reduce taxable income by offsetting interest expense (depending on ownership structure). But high levels of debt can also create risks, especially if properties are held for legacy reasons rather than yield.

For individuals, debt relief is restricted, making high gearing less attractive from a tax perspective. For companies, debt can be fully offset—but interest cover ratios (ICR) and stress testing can limit how much lenders will advance.

Families must therefore treat debt not just as a financial instrument but as part of an overall tax strategy.

Borrowing through a company may be more tax-efficient, but only if lenders are comfortable with the structure.

Example Scenario: The Unbalanced Portfolio

Consider a family that owns 12 properties personally. Rental income is strong, but interest restrictions have made tax liabilities painful. They are considering moving the portfolio into a company structure.

The challenge is that such a transfer would trigger SDLT and potentially capital gains tax. At the same time, lenders may be reluctant to refinance into a new structure unless governance is strong and directors provide guarantees.

Here we see the tension between tax efficiency and borrowing power. While a company may reduce tax bills in the long run, the upfront cost and complexity could outweigh the benefits. For families, this is where specialist tax advice and independent finance guidance must intersect.

Balancing Family Values with Tax and Lending

The decision about ownership structure is never purely financial. Families must also consider their values.

If legacy preservation is the priority, trusts may appeal, even if borrowing power is constrained. If scalability is key, a company may offer the right balance of tax efficiency and lender flexibility. If simplicity matters, direct ownership may remain appropriate despite tax inefficiencies.

The key is alignment. Families who understand how tax, debt, and governance interact are better placed to make informed choices. They also stand a stronger chance of finding lenders willing to support them.

The Long-Term View

Tax rules evolve, sometimes quickly. What seems efficient today may be less so tomorrow. Families who succeed in 2025 and beyond are those who avoid chasing short-term tax gains and instead focus on resilient structures that align with their borrowing strategy and values.

The most successful families build a joined-up approach. They engage tax advisers for structuring, lawyers for governance, and independent brokers for finance. Together, these perspectives ensure portfolios are not only tax-aware but also financeable and sustainable.

How Willow Can Help

At Willow Private Finance, we don’t provide tax advice—but we work closely with families, accountants, and solicitors to ensure property finance aligns with tax planning. Our role is to navigate the lending landscape, helping families secure borrowing that fits the structures their advisers recommend.

Whether portfolios are held personally, through companies, or within trusts, Willow’s whole-of-market access allows us to identify lenders comfortable with each approach. We ensure tax planning does not unintentionally limit borrowing power.

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