Should You Move Your Rental Portfolio Into a Company? The Tax Trade-Offs

Quick answer: Moving rental property into your own company is treated as a sale at market value. Incorporation relief under section 162 can defer the capital gains tax, but only if your letting is a genuine business, and from 6 April 2026 you must claim it. SDLT is usually charged on market value and is often the biggest cost, so the numbers need testing before anything moves.

Why landlords look at incorporation

For individuals, finance costs on residential lettings are not deducted from rental profit. Under Section 24 you receive a tax reduction at 20% of the finance costs instead. That rate rises to 22% from 6 April 2027, when individuals' rental profits also move to separate rates of 22%, 42% and 47%.

A company is outside Section 24. It deducts interest like any other business and pays corporation tax at 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between. For a highly geared landlord, that can be a big difference.

But incorporation is a trade-off. The gains built up in your properties and the SDLT on moving them do not disappear on their own. Some portfolios are better left alone.

Capital gains tax and section 162 relief

Transferring property to your own company is a disposal at market value, even though you receive shares and not cash. Without relief, the whole accumulated gain could be taxed at 18% or 24%.

Section 162 of the Taxation of Chargeable Gains Act 1992 applies when you transfer a business as a going concern, with all its assets (or all but cash), wholly or partly in exchange for shares. The gain is not taxed at that point. It is deducted from the base cost of your new shares, so the tax is deferred until you sell the shares. If you take part of the value as cash or debt, the relief is reduced.

Two points matter now:

• You must claim. For transfers on or after 6 April 2026 the relief is no longer automatic. For a 2026/27 transfer the claim deadline is 31 January 2029.
• It is all or nothing in principle. Relief needs the business transferred as a whole. A partial transfer may leave a gain in charge immediately, although a separate business within a portfolio can sometimes be incorporated on its own facts.

Is your letting a business?

There is no statutory definition. HMRC looks for a serious undertaking, carried on with reasonable continuity, real substance and sound commercial principles, using the indicators from the Ramsay case. HMRC accepts relief where an individual personally spends about 20 hours or more a week on the portfolio. Below that, it is decided case by case.

You cannot get HMRC to confirm this in advance. There is no statutory clearance for section 162, and HMRC will not rule on questions of fact. So we build an evidence file on your hours, tasks and decisions before the transfer. Our article asks the question directly: is your property business an actual business?

Stamp Duty Land Tax

Where you and the company are connected, SDLT is charged on market value, not on any price you actually pay. That includes the 5 percentage point higher-rates surcharge. A dwelling worth over £500,000 may attract the 17% flat rate unless a relief for property rental businesses applies. The SDLT can be larger than the CGT you defer.

A genuine partnership can change the result, because the partnership rules in Schedule 15 to the Finance Act 2003 can reduce the chargeable amount on a transfer to a connected company. But:

• joint ownership is not a partnership. The Partnership Act 1890 says so;
• HMRC applies the anti-avoidance rule in section 75A to artificial arrangements;
• HMRC's Spotlight 69 (April 2025) says the LLP and liquidation route does not work.

We take a conservative view. An SDLT return is due within 14 days of completion.

Mortgages and lenders

Your existing lender will not normally let a property move with its mortgage. The company needs new borrowing to repay your personal loans, often on commercial terms and sometimes with personal guarantees. This is frequently the slowest step.

The order of steps matters. Business liabilities taken over by the company are not treated as consideration under extra-statutory concession D32. Cash paid to you to clear a personal mortgage is, and it reduces the relief. Speak to your broker before you commit to the plan.

Getting money out afterwards

Profits belong to the company. Taking them out means a salary, a dividend, a pension contribution or a director's loan repayment. Dividends in 2026/27 are taxed at 10.75%, 35.75% or 39.35% above a £500 allowance. A loan from the company to you that is still outstanding nine months after its year end faces a section 455 charge, at 35.75% for loans made from 6 April 2026.

Leaving profit in the company to reinvest can be efficient. Drawing all the profit personally often removes the benefit.

What our analysis covers

We start with your numbers, not a template. The analysis covers:

1. whether the activity passes the business test, and the evidence;
2. the capital gains position, with and without section 162;
3. SDLT on market value, and whether a genuine partnership exists;
4. the lender position and the cost of new borrowing;
5. Section 24 saved against the extra costs of a company;
6. how profit will come out, and what that costs;
7. ongoing costs: accounts, corporation tax returns and, for dwellings worth more than £500,000, ATED returns;
8. inheritance tax. Rental property in a company rarely qualifies for business relief, so planning has to be built in separately.

Example: A higher-rate taxpayer owns eight properties worth £2m in total, with £1m of borrowing and £0.5m of accrued gains. Moving them into a company might defer the gain through section 162, but SDLT on £2m at market value could be significant. If the tax saved each year from deducting interest were £15,000, the break-even point could be many years away. These figures are hypothetical. We run the calculation on real numbers before you decide.

When it is not worth it

Incorporating is usually a poor idea where there are large unrealised gains and no relief, low borrowing, a basic-rate taxpayer who gets little from finance cost relief, or an owner who wants to draw all the profit personally. A low-geared portfolio held for income is often best left alone. Buying new property through a company is a different question.

For more on the comparison, read our article on whether incorporating is still worth it in 2026/27. The full service page is Property Portfolio Incorporation.

Talk to us about Property Portfolio Incorporation

• Incorporation relief under section 162 can defer CGT, but only if the rental activity is a business
• From 6 April 2026 the relief must be claimed, it is no longer automatic
• SDLT is usually charged on market value, unless a partnership route properly applies

See how we help or book a free 20-minute call.

FAQs

How long does a property incorporation take?

Planning and modelling usually take a few weeks, depending on how quickly we receive valuations and mortgage details. The lender process is often the slowest step. After completion we handle the SDLT return, the incorporation relief claim and the handover so your accountant can update the records.

Do I have to claim incorporation relief now?

For transfers on or after 6 April 2026, yes. The relief used to apply automatically, and the option to disapply it has gone. The claim deadline for a 2026/27 transfer is 31 January 2029. Keep the business details, the company number, the shares issued and the computation.

Can I incorporate just some of my properties?

Section 162 needs the business transferred as a going concern with all its assets, or all but cash. If you transfer only part of the portfolio, relief may not be available for what moves, and a gain could arise at once. In some cases a separate business within the portfolio can be incorporated. The facts need careful analysis.

What base cost does the company get?

The company acquires each property at market value on the transfer date, because you and the company are connected. If it later sells, its gain is measured from that value. If you claim incorporation relief, your deferred gain is deducted from the base cost of your new shares instead.

Will I pay ATED after incorporating?

If the company owns a dwelling worth more than £500,000, it falls within the Annual Tax on Enveloped Dwellings. Properties let commercially to unconnected tenants usually qualify for relief, but the company must still file a Relief Declaration Return each year. Letting to family, or allowing them to live there, can lose the relief.

Next step

If you are weighing up a move into a company, we will tell you plainly whether the numbers are likely to work. Sometimes the right answer is not to incorporate. We offer a free 20-minute call to start. Book a call.