Many UK property investors hold property in a limited company rather than personally. Fractional ownership uses the same idea, with many shareholders instead of one. This is a general overview, not tax advice.
How it works
A company, often a special purpose vehicle (SPV) set up for property only, buys and owns the building. The company receives the rent, pays the costs, and pays corporation tax on its profits.
Getting money out
Profits are usually paid to shareholders as dividends, taxed at dividend rates after the dividend allowance. Shareholders may also pay Capital Gains Tax if they sell their shares at a profit.
Mortgage interest
Individual residential landlords have restricted relief for mortgage interest. Companies can generally deduct interest as a business cost, subject to their own rules.
Purchase taxes
Companies buying residential property can face higher rates of SDLT. Commercial property is taxed at non-residential rates. See stamp duty on commercial property.
Fractional ownership
With fractional ownership, the company is set up and run for you, and you simply hold shares. See how SPVs work.
This guide is general information, not financial, tax or legal advice. If you are unsure whether an investment is right for you, speak to a regulated financial adviser.