Sole trader

A sole trader holds property in their own personal name, with income and expenses reported in their individual tax return.

How it works for property

Rental income and deductions go in your IR3. Profits are taxed at your marginal rate. Losses are ring-fenced within the residential portfolio.

Advantages

Simplest and cheapest — no formation cost, no annual returns for a separate entity, no separate accounting. For a single rental, often entirely appropriate.

Disadvantages

• No liability separation. Personal assets are exposed.
• Income is taxed at your marginal rate, which may be higher than a company rate
• Less flexibility for income splitting or succession
• Changing structure later can trigger a disposal for tax purposes

Common misunderstanding

Simple is not the same as wrong. Many investors are talked into complex structures that cost thousands annually and deliver little benefit at their scale. The structure should match the portfolio, not the seminar.

But changing later is not free. Moving property between entities can be a disposal, potentially triggering bright-line. Get advice before the first purchase, not the third.

Related terms

Last reviewed: 1 August 2026 · General information only, not tax advice.

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