Should you develop property personally or via a company?

If you purchased personally, the future gain on the development of the property would arise on you personally. You'd need to assess whether you'd be treated as a property trader or investor. Assuming you still are classed as a property investor the benefits of a personal development are: - You would be entitled to offset the annual CGT exemption against any gain arising. You could therefore dispose of one property each tax year to utilise your annual CGT exemptions (eliminating approximately £9,600 of the gain per year). If you purchased the property in your childrens or spouses name as well this would allow more annual exemptions to be offset. - If you were considering occupying one or more of the properties you could also claim principal private residence ('PPR') relief to reduce the gain. - Any remaining gain would be taxed at 18%. If you were to use the company to develop the properties the company would not be entitled to any of the above reliefs/exemptions, only the less attractive indexation allowance which would not significantly reduce the gain. Any gain that arose in the company would be taxed at 21%/22% (assuming profits are below £300K) as opposed to 18%. Provided the proceeds weren't extracted from the company, this would be the only tax charge. Therefore overall developing personally would still be the best option for many. For more information see our tax book Using a Property Company to Save Tax