In practice, that can mean a Capital Gains Tax issue for the person transferring the property and, for property in England or Northern Ireland, a possible SDLT charge for the company, even if no money changes hands.
The main taxes to consider are usually CGT for the person making the transfer, SDLT, LTT or LBTT for the company depending on where the property is located, and Corporation Tax on the company’s future profits and gains.
In some cases, other taxes such as ATED or potentially IHT may also be relevant. Understanding how these rules fit together is essential, because a transfer to a company can create significant tax costs both at the point of transfer and later.
Why People Transfer Property to a Limited Company
Many landlords consider incorporation because the finance-cost restriction for individual residential landlords does not apply to companies. Instead, companies are taxed under the Corporation Tax regime. Depending on profit levels, the rate is generally 19% for profits up to £50,000 and 25% for profits above £250,000, with marginal relief applying between these thresholds.
However, some companies, such as close investment-holding companies, are not eligible for the small profits rate or marginal relief and are taxed at the main rate.
That may sound attractive, but moving property into a company can trigger significant upfront tax and financing costs, so it is not suitable in every case. Whether it works in practice depends on the number of properties involved, any mortgages secured on them, your wider tax position, and your long-term plans.
Note
A close company is, in very broad terms, a company controlled by five or fewer participators (for example, shareholders) or by any number of participators who are also directors.
How HMRC Treats a Property Gift to a Limited Company
The first thing to understand is that HMRC does not treat this as a gift in the usual sense.
Under the connected persons rules in the Taxation of Chargeable Gains Act 1992, if you transfer an asset to a person or company connected to you, the transaction is treated as if it took place at open market value. The actual price paid, even if it is £1 or nothing at all, is ignored.
So, if you own a property worth £350,000 and transfer it to your own limited company for free, HMRC calculates tax on the basis that you sold it for £350,000. There is no discount for the fact that you are the company’s sole director and shareholder because the company and you are treated as a separate legal entity.
Capital Gains Tax When You Gift Property to a Company
What Is CGT and When Does It Apply?
CGT Rates for Residential Property in 2025/26
For example,
Sarah bought a buy-to-let flat in 2010 for £150,000 and transfers it to her limited company in March 2026 at a market value of £320,000. Her gain is £170,000. After deducting her £3,000 exemption, her taxable gain is £167,000. As a higher rate taxpayer at 24%, she owes £40,080 in CGT, even though no money changed hands.
Can You Defer the CGT with Incorporation Relief?
To qualify, you must transfer a whole business as a going concern, transfer all business assets other than cash, and receive only shares in return, not cash or a loan account.
Critical 2026 Change: Incorporation Relief Is No Longer Automatic
Incorporation Relief is currently automatic if the statutory conditions are met. HMRC’s current guidance says a separate claim is not required under the existing rules, although the transferor can elect for the relief not to apply. In other words, for transfers made before 6 April 2026, the relief can apply automatically if the conditions in section 162 TCGA 1992 are satisfied.
For transfers on or after 6 April 2026, the transferor must claim Incorporation Relief in their Self-Assessment return for the tax year of transfer, providing transaction details and computations. The relief no longer applies automatically.
Because Incorporation Relief is highly fact-sensitive, especially in property business cases, specialist tax advice should be taken before relying on it.
Does Your Property Qualify as a Business?
This is often the most difficult part of claiming Incorporation Relief. HMRC does not automatically treat rental income as a business for these purposes. It looks at the facts.
According to the Ramsay case law, an owner personally spending around 20 hours or more a week on business-type activities may help demonstrate that the property activity constitutes a business, although this is not a statutory fixed test.
In general, the strongest cases are those where the landlord runs a property portfolio in a genuine business-like way and is personally involved in its day-to-day management. A larger portfolio that is actively managed by the owner, with regular involvement in tenant matters, lettings, rent collection, repairs, maintenance, and record-keeping, will usually provide a stronger case than a smaller portfolio with only limited involvement. Keeping separate bank accounts and proper records may also help support the position, although no single factor is decisive. Because this area is highly fact-sensitive, it is sensible to take specialist tax advice before relying on the relief.
Stamp Duty Land Tax When a Company Receives Property
SDLT Is Based on Market Value
SDLT Rates for Companies in 2025/26
Where a company acquires a residential property costing more than £500,000, a flat 17% rate can apply if no relief is available. However, this rate is disapplied where the property is acquired for a genuine property rental business or other qualifying use, provided the relevant relief is claimed. If the conditions for that relief cease to be met within 3 years, the relief may be withdrawn and additional SDLT may become payable.
SDLT example
James transfers a rental property worth £400,000 to his limited company, and the company will use it only for a genuine property rental business. In that case, the 17% rate for certain corporate buyers should not apply, so the purchase is instead taxed at the higher residential SDLT rates. HMRC also treats the transfer as taking place at market value for SDLT purposes where the company is connected to the transferor.
On a £400,000 market value, the SDLT from 1 April 2025 would be:
Portion of Value | Rate | SDLT Calculation | SDLT Amount |
|---|---|---|---|
First £125,000 | 5% | £125,000 × 5% | £6,250 |
Next £125,000 | 7% | £125,000 × 7% | £8,750 |
Remaining £150,000 | 10% | £125,000 × 10% | £15,000 |
Total | - | - | £30,000 |
Total SDLT: £30,000. Even though no money changes hands, the company can still face a substantial SDLT bill, which is one of the main upfront costs of incorporation.
What About Partnership SDLT Relief?
Where a genuine rental property partnership is incorporated, the special SDLT partnership rules may reduce the SDLT charge if the same partners continue through the company as shareholders. But this is not a simple blanket relief and does not apply automatically. The result depends on the statutory calculation and the facts, and HMRC may challenge arrangements that are not genuine or are mainly designed to obtain an SDLT advantage.
Corporation Tax: What the Company Pays Going Forward
Corporation Tax Rates in 2025/26
Rental income and gains from selling property within the company are both subject to Corporation Tax. Unlike personal ownership, where rental profits can be taxed at up to 45%, a company pays at most 25%, which is one of the main reasons landlords consider incorporation.
No CGT Annual Exemption for Companies
Extracting Profits
Salary attracts Income Tax and National Insurance. This additional layer of tax on extraction means corporate ownership does not always produce a lower overall tax bill, particularly for smaller portfolios.
Annual Tax on Enveloped Dwellings
ATED is an annual tax payable mainly by companies owning UK residential property valued at more than £500,000. For 2025/26, the annual charge ranges from £4,450 for properties valued between £500,000 and £1 million, up to £292,350 for properties valued above £20 million. ATED relief is available in several cases, including where the property is used in a qualifying property rental business run commercially with a view to profit. If the company is relying on that relief, it will normally need to claim it by filing a Relief Declaration Return. If relief is not claimed, ATED filing obligations and possible charges still need to be considered, although the position can be fact specific.
Checklist: Key Steps Before Transferring Property to a Limited Company
Transferring property to a limited company triggers multiple tax charges. Before making any decisions, work through the following steps to protect yourself and avoid costly mistakes.
- Get a Professional Market Valuation HMRC uses market value on the date of transfer for both CGT and SDLT, regardless of what you receive. Your valuation should be professionally prepared and defensible. However, this is not compulsory.
- Calculate Your CGT Liability Work out your gain using the current market value minus your original purchase price and buying costs. Apply the £3,000 annual exemption and the correct rate, 18% for basic rate taxpayers or 24% for higher and additional rate taxpayers.
- Calculate the Company's SDLT Liability SDLT is based on market value, not the price paid. Check whether letting business relief applies, as without it, properties over £500,000 may attract the 17% flat rate for companies.
- Check Whether Incorporation Relief Applies If you can demonstrate a genuine property business, Incorporation Relief under Section 162 TCGA 1992 may allow you to defer CGT. At present, Incorporation Relief is automatic if you qualify, but HMRC has announced that a claim through the Self-Assessment return will be required for transfers on or after 6 April 2026.
- Check Your Mortgage Position Most mortgage lenders require consent before ownership is transferred. The company will need its own mortgage, which may involve higher rates and additional fees.
- Consider ATED If a company holds UK residential property valued at more than £500,000, the property may fall within ATED, but reliefs may be available and filing obligations still need checking.
- Take Specialist Advice The interaction between CGT, SDLT, Corporation Tax and ATED is complex. Always speak to a specialist tax adviser and property solicitor before proceeding.
Incorporating might also be beneficial and non-beneficial, you might save some taxes and might be liable to some in form of CGT and SDLT, it might be better to go through the numbers first before taking any decision.
Need Help?
How UK Property Accountants Can Help
UK Property Accountants helps landlords assess whether incorporation is tax efficient, calculate SDLT and CGT, and compare upfront costs with future tax savings.
Conclusion
Transferring property to a limited company sounds straightforward but is one of the most tax-heavy transactions a UK property owner can make. HMRC treats the transfer as a market-value disposal, meaning CGT for you and SDLT for the company, even if no money changes hands.
The corporation tax benefits of holding property in a company can be real, but they may take years to offset the upfront costs. CGT applies at 18% or 24% on the gain, SDLT applies based on market value with the 5% surcharge on all company residential purchases, and Incorporation Relief is only available where you can demonstrate a genuine business and, from 6 April 2026, must be actively claimed.
For the right landlord with a substantial portfolio, the strategy can work well over the long term. For others, the immediate tax cost makes it unworkable. Specialist professional advice is essential before taking any steps.
Frequently Asked Questions
Yes. If the transfer gives rise to Capital Gains Tax on UK residential property, it must generally be reported and paid within 60 days of completion using the CGT on UK Property service. For property in England or Northern Ireland, the company will generally also need to file an SDLT return and pay any SDLT due within 14 days of the effective date of the transaction.
No. Under HMRC’s connected persons rules, transfers to your own company are always treated at full market value, regardless of the actual price paid. This prevents reducing CGT or SDLT by undervaluing the transfer.
For Corporation Tax on chargeable gains, the company will generally use the property’s market value at acquisition if it did not acquire it in a normal commercial transaction. That market value then forms the starting point for calculating any future chargeable gain when the company later disposes of the property.
Yes, but losses on transfers to connected parties are subject to strict restrictions. If a disposal to a connected person creates a capital loss, HMRC treats it as a restricted or “clogged” loss. In general, that loss cannot be set against your other capital gains in the normal way. Instead, it can usually only be set against gains arising on other disposals to the same connected person, and only while the connection still exists.
No. A transfer to a company cannot be a PET for Inheritance Tax, because PETs only apply to gifts to individuals or certain trusts. If there is a gift element, it may instead be an immediately chargeable lifetime transfer, potentially subject to IHT at 20%, (or 40% if the transferor dies within seven years).
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