For many landlords, incorporation (moving properties into a limited company) looks like a great option. Corporation Tax rates can be lower than higher-rate Income Tax, mortgage interest restrictions disappear, and holding property through a limited company can create greater flexibility for long-term portfolio growth.
However, incorporation is not simply a matter of transferring properties into a company and enjoying lower tax rates. For existing landlords, the transfer itself can trigger substantial Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT). In some cases, those upfront costs can wipe out the tax savings incorporation was meant to achieve.
This is why the success or failure of an incorporation strategy often hinges on two key reliefs – Section 162 Incorporation Relief for CGT and SDLT partnership relief. When these reliefs apply, incorporation can become significantly more attractive.
In this article, we examine how these reliefs work, when they are available, and the factors landlords should consider before moving a property portfolio into a limited company.
Key Takeaways
- Landlord incorporation reached a record high in 2025, with 66,587 new Buy-to-Let companies formed
- Moving personally-held property into a company is treated as a sale, potentially triggering CGT and SDLT on the full market value
- Section 162 Incorporation Relief (TCGA 1992 s.162) can defer the CGT, but only where your letting activity counts as a “business”
- SDLT partnership relief (FA 2003 Sch 15) can reduce the SDLT charge to nil, but only for a genuine partnership and within strict anti-avoidance rules
- For a leveraged higher-rate landlord, incorporation can save tax; but for a low-borrowing landlord with large latent gains, it can cost more than it saves
Are Many Landlords Rushing To Incorporate?
It certainly looks that way. According to the luxury estate agent Hamptons, a record 66,587 Buy-to-Let companies were formed in 2025. This is up 8% from 2024 and has brought the total number of Buy-to-Let companies in the UK to more than 443,000.
This trend is also visible in the mortgage market. Paragon Bank reports that limited companies accounted for 43% of all mortgaged Buy-to-Let purchases in 2025. In 2018, that figure was just 7.5%.
The main reason behind this rush to incorporation is tax. Since the introduction of Section 24, individual landlords have been unable to deduct mortgage interest before calculating their tax bill. Instead, they receive a basic-rate tax credit. Limited companies, by contrast, can deduct finance costs in full before paying Corporation Tax.
The tax rate can also be attractive. Companies can also benefit from lower tax rates on retained profits. Corporation Tax is currently charged at 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief available in between. By contrast, individual landlords can pay Income Tax at rates of up to 45%, depending on their total income and where they live in the UK.
The gap between Corporation Tax and Income Tax is set to widen further from 6 April 2027. From then, rental profits earned by individual landlords in England, Wales and Northern Ireland will be taxed at 22%, 42% and 47%. That is two percentage points higher than the equivalent rates on earned income. When combined with frozen tax thresholds until 2031 and the arrival of Making Tax Digital for Income Tax, many landlords are taking a fresh look at incorporation.
At first glance, this appears to strengthen the case for incorporation. However, there is an important detail that is often overlooked.
From April 2027, finance cost relief for individual landlords will also increase to 22%, matching the new basic rate for property income. This means highly geared landlords may be less affected by the rate rise than many expect. In contrast, landlords who own their properties outright or have little borrowing could see a much bigger increase in their effective tax burden.
As a result, the landlords most attracted by incorporation are often the very ones who face the largest potential Capital Gains Tax and Stamp Duty Land Tax costs when transferring properties into a company.
What Makes Incorporation Risky: Transferring Property Is a Taxable Event
Buying a property inside a fresh company is straightforward. Moving a property you already own into a company is not. HMRC treats the transfer as a disposal at market value, even though no money changes hands and you control both sides.
That disposal can crystallise two charges at once. Capital Gains Tax arises on the gain since you acquired each property, at 18% or 24% for residential property in 2026/27. SDLT arises on the market value transferred, charged at residential rates plus the 5% higher-rate surcharge that applies to company purchases.
Thus, the transfer of properties into a limited company produces a tax bill but no sale proceeds to pay it. Several landlords commit to incorporating only to discover a five-figure liability with nothing to fund it.
How Does Landlord Incorporation Trigger Capital Gains Tax?
Landlord incorporation can trigger CGT because transferring a property from yourself to a limited company is treated as a disposal for tax purposes. In effect, HMRC treats the transfer as if you had sold the property.
However, Section 162 Incorporation Relief can prevent an immediate CGT bill in some cases. According to HMRC's guidance on Incorporation Relief, where a property business is transferred as a going concern (TOGC) and the consideration consists wholly or partly of shares in the company, the gain can be rolled into the base cost of those shares rather than taxed at the point of transfer.
The key question is whether you are transferring a genuine property business rather than simply a collection of investment assets. This is where many incorporation plans succeed or fail.
As established in the Elizabeth Moyne Ramsay case, passive property ownership may not be enough to qualify for Incorporation Relief. HMRC's CG65700 guidance similarly states that there must be a business being carried on, with sufficient activity and management involved. The level of activity required depends on the specific facts of each case.
As a result, eligibility for Incorporation Relief cannot be determined by the size of your portfolio alone. The amount of time spent managing properties, dealing with tenants, arranging repairs, and carrying out other business activities can all be relevant factors when assessing whether relief is available.
Can You Mitigate SDLT When You Incorporate?
Often, yes, through SDLT partnership relief. Where property is held in a genuine partnership and transferred to a connected company, the Finance Act 2003 Sch 15 paras 18–20 replace the normal charge with a formula based on the “sum of the lower proportions.” Where the partners' shares match their shareholdings, the chargeable consideration can fall to nil.
This is powerful but fragile. There must be a real partnership, not mere joint ownership. Creating a partnership purely to incorporate risks the general anti-avoidance rule in Finance Act 2003 s.75A, and withdrawing capital within three years can claw the relief back under Sch 15 para 17A. Sequencing and documentation are everything, which is why a properly structured partnership incorporation is planned months ahead, not at completion.
Worked Example: The Difference Reliefs Make
This is the kind of case that reaches us at UK Property Accountants most weeks. A husband-and-wife partnership have run their lettings together for over a decade. They hold four properties worth £1.2 million between them, sitting on £450,000 of latent gains, with £520,000 of outstanding mortgages. Both are higher-rate taxpayers, and the April 2027 rates have pushed them towards incorporation.
The figures below show what moving their portfolio into a company looks like with and without incorporation relief and partnership relief.
Upfront Tax on Transfer | Without Reliefs | With Reliefs |
|---|---|---|
CGT on £450,000 Gain | £108,000 (at 24%) | £0 (Deferred under section 162) |
SDLT on £1,200,000 | £123,750 (including 5% surcharge) | £0 (Under FA 2003 Sch 15) |
Total Upfront Cost | £231,750 | £0 |
When they transfer the portfolio without qualifying for relief, they face £231,750 in CGT and SDLT, with no sale proceeds to pay it. Qualify for both reliefs and the upfront cost can be nil, with the Corporation Tax saving compounding every year afterwards. That £231,750 swing is the entire reason incorporation demands specialist advice.
Not sure which side of that £231,750 gap you're on?
Let us tell you.
Conclusion
So, should you incorporate?
Possibly, but only if the numbers work for your portfolio. A company structure can produce substantial long-term tax savings, particularly for landlords with mortgages who reinvest profits. However, those benefits can be wiped out by the CGT and SDLT costs of transferring properties into a company.
Just as importantly, a limited company is not a tax-free wrapper. Dividend tax, anti-avoidance rules and the availability of Section 162 Incorporation Relief and SDLT partnership relief can all affect the outcome.
That is why incorporation is a calculation, not a strategy. Before transferring a single property, you need to know whether the reliefs apply and whether the long-term savings outweigh the upfront costs.
Find Out Whether Incorporation Will Actually Save You Tax
At UK Property Accountants, our incorporation feasibility review confirms whether Section 162 Incorporation Relief and SDLT partnership relief apply to your situation, models the SDLT, CGT and Corporation Tax impact, and gives you a clear yes or no before you move a single title.
FAQs
Usually less so. The long-term tax saving needs to outweigh the upfront CGT and SDLT plus ongoing company costs and higher mortgage rates. Landlords with one or two lower-value properties, little borrowing, or who draw most of their rental income each year often find the costs outweigh the benefit.
Potentially yes, at residential rates plus the 5% surcharge on the market value. SDLT partnership relief under FA 2003 Sch 15 can reduce this to nil, but only for a genuine partnership transferring to a connected company within the anti-avoidance rules.
No. It defers the gain by rolling it into the base cost of your new shares, so tax may arise later if you sell the shares.
There is no single national landlord register in England. However, if you receive rental income, you may need to register for Self Assessment with HMRC and report your rental profits. Other obligations, such as landlord licensing requirements, depend on the location and type of property.
Possibly. From 6 April 2027, individual landlords in England, Wales and Northern Ireland will face new property income tax rates of 22%, 42% and 47%, which are two percentage points higher than the equivalent rates on earned income.
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