This article is for general information only and does not constitute tax advice. Consult a specialist property tax accountant.
If you hold rental properties in your personal name and pay higher-rate income tax, moving the portfolio into a limited company can reduce your annual tax bill. Corporation tax on rental profits is 19% to 25% (depending on total profits), compared to 40% or 45% income tax. Mortgage interest is fully deductible within the company, unlike personal-name ownership where Section 24 restricts the deduction to a 20% tax credit.
The attraction is obvious. The problem is getting the properties into the company.
The cost of transfer
When you transfer a property from personal ownership to a limited company, HMRC treats it as a disposal at market value. Two taxes bite:
Capital Gains Tax (CGT). The gain between your original purchase price and the current market value is a chargeable gain. If you bought a property for £120,000 and it is now worth £200,000, the gain is £80,000 (minus allowable costs). CGT at 24% on residential property produces a tax bill of approximately £19,200.
Stamp Duty Land Tax (SDLT). The company purchasing the property pays SDLT on the market value, including the 5% additional dwellings surcharge. On a £200,000 property, the SDLT bill is approximately £8,500.
Combined, transferring a single property worth £200,000 with an £80,000 gain could cost £27,700 in tax. Multiply that across a portfolio and the transfer costs quickly become prohibitive.
Section 162 incorporation relief
Section 162 of the Taxation of Chargeable Gains Act 1992 allows CGT to be deferred when a business is transferred to a company as a going concern in exchange for shares.
The conditions are strict. You must transfer the entire business (all properties, tenancies, bank accounts, contracts, and liabilities). The transfer must be in exchange for shares in the company (not cash). The business must qualify as a "business" for CGT purposes, which HMRC interprets as requiring active management beyond passive rent collection.
If Section 162 applies, the CGT liability is deferred into the base cost of the shares you receive in the company. You do not pay CGT on incorporation. You pay it later if and when you sell or liquidate the company.
Section 162 does not help with SDLT. The company still pays SDLT on the market value of the transferred properties.
When incorporation makes sense
The annual tax saving from paying corporation tax instead of income tax must outweigh the one-off costs of incorporation over a reasonable period. For a portfolio generating £50,000 in annual rental profit, the difference between 40% income tax (£20,000) and 25% corporation tax (£12,500) is £7,500 per year.
If the incorporation costs (SDLT, legal fees, accountancy restructuring) total £30,000, the payback period is four years. If costs total £60,000, eight years. The calculation depends on portfolio size, current values, original purchase prices, and the available reliefs.
Incorporation is most likely to make sense for landlords who: are higher-rate or additional-rate taxpayers, have significant mortgage debt (benefiting from full deduction within the company), plan to hold the portfolio long term, and can access Section 162 relief to defer CGT.
What you need
A specialist property tax accountant. This is not a DIY exercise. A solicitor to draft the business transfer agreement and company structure. An SPV (Special Purpose Vehicle) limited company with the correct SIC codes. A BTL mortgage broker to arrange limited company mortgages for the transferred properties (most existing personal-name mortgages do not permit transfer to a company without refinancing).
The restructuring typically takes three to six months and costs £5,000 to £15,000 in professional fees before SDLT.
Sources
- HMRC, "Incorporation relief (Section 162 TCGA 1992)". https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65700 [Accessed 6 May 2026]
- GOV.UK, "Corporation Tax rates". https://www.gov.uk/corporation-tax-rates [Accessed 6 May 2026]