Transferring a rental property from your own name into a limited company looks, on paper, like an internal reshuffle. For capital gains tax it is the opposite: HMRC treats it as a sale. You and your company are connected persons, so the transfer is deemed to happen at the property's open-market value under TCGA 1992 s.17 and s.18, whatever price (if any) you actually record. A gain crystallises on the growth since you bought the property, even though not a penny has moved.
That single fact is what makes the CGT-on-incorporation calculation worth getting right before you act, not after. Below is the exact sum, the 18% and 24% rates as they stand for 2026/27, and the two reliefs (Section 162 incorporation relief and, in narrow cases, holdover) that decide whether the bill is real cash or a deferral. There is also a worked example you can map onto your own numbers.
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Why the transfer is taxed at market value
The starting point is the connected-persons rule. Under TCGA 1992 s.17, any disposal that is not a bargain at arm's length is treated as made for a consideration equal to market value. A transfer to a company you control is the textbook example: s.18 confirms you and your company are connected, so you cannot sidestep CGT by transferring at original cost or at a token sum. The gain is fixed by the property's current value, not by the paperwork.
This is also why a defensible valuation is the foundation of the whole exercise. Understate the value and you risk an HMRC enquiry and penalties; overstate it and you pay more CGT than you owe (and hand the company a higher base cost than it can support). For higher-value properties a formal RICS valuation is the sensible standard; for lower-value stock, a written estate-agent appraisal backed by genuine comparable sales will usually hold. The valuation fee is itself an allowable cost in the CGT computation.
How to calculate the CGT on a property transfer
The computation is the same one you would run on an open-market sale, with market value standing in for the sale price. In order:
- Market value at transfer (the deemed proceeds)
- Less the original purchase price
- Less acquisition costs: legal fees and the SDLT you paid when you bought
- Less capital improvements (extensions, a new kitchen, structural work, never routine repairs)
- Less the legal and valuation costs of the transfer itself
- Equals the gross gain
- Less the annual exempt amount of £3,000 (2025/26 and 2026/27)
- Equals the chargeable gain, taxed at 18% then 24%
The crucial detail landlords miss is the rate split. Residential property gains are charged at 18% to the extent they fall within your remaining basic-rate band and 24% above it, under TCGA 1992 s.1H as set by Finance Act 2024 and in force from 6 April 2024. The test stacks the gain on top of your income for the year, so a substantial incorporation gain almost always crosses the threshold and is taxed partly at each rate.
Worked example: a Manchester flat
Take an anonymised case. A landlord bought a buy-to-let flat in central Manchester for £180,000 in 2018 and paid £2,500 in legal fees and SDLT on purchase. There were no capital improvements. The flat is now independently valued at £280,000, and she transfers it to her own company. Her employment income for the year is £45,000, leaving roughly £5,270 of basic-rate band before the gain.
| Step | Figure |
|---|---|
| Market value at transfer (deemed proceeds) | £280,000 |
| Less original cost | (£180,000) |
| Less acquisition costs | (£2,500) |
| Gross gain | £97,500 |
| Less annual exempt amount (2026/27) | (£3,000) |
| Chargeable gain | £94,500 |
| Taxed at 18% (first £5,270 within basic-rate band) | £948.60 |
| Taxed at 24% (remaining £89,230) | £21,415.20 |
| Total CGT | £22,363.80 |
If her income had used the whole basic-rate band before the gain, the entire £94,500 would have been at 24% (£22,680). If she had been well inside basic rate, more of it would have fallen at 18%. The point is not the headline figure: it is that on a direct transfer with no relief, a six-figure gain produces a real five-figure cash bill, due within 60 days. That is the number incorporation relief is designed to remove.
Can you incorporate without paying CGT?
This is the question behind every "CGT-free incorporation" search, and the honest answer is conditional. There is no blanket exemption for moving a buy-to-let into a company. But where your lettings genuinely amount to a business, Section 162 incorporation relief can defer the entire gain, so there is nothing to pay at the point of transfer. The two reliefs people reach for are very different in scope, so it is worth being precise about which one actually applies.
Section 162 incorporation relief
Under TCGA 1992 s.162, where a person transfers a business as a going concern, together with the whole of its assets (or the whole other than cash), wholly or partly in exchange for shares, the gain is rolled into the base cost of those shares. You pay no CGT now; the deferred gain surfaces only when you eventually dispose of the shares. For a landlord incorporating a portfolio, this is the main route to a no-cash-now incorporation.
Two current points matter and trip people up. First, since Finance Act 2026 the relief must be claimed, under the new s.162(1)(b), by the first anniversary of the 31 January following the tax year of transfer. It is no longer automatic, and FA 2026 also repealed the old s.162A election to disapply it, so the position is now claim-or-no-relief. Second, the "business" test is real, not a formality. HMRC expects evidence of active management of a property portfolio (the kind of activity considered in Ramsay v HMRC), not a single flat managed by a letting agent. A passively held buy-to-let will usually fail the test. Our dedicated guide to Section 162 incorporation relief for property landlords works through the business test in detail.
Holdover relief: usually not the answer
Searches for "CGT holdover property" and "holdover relief property" often lead landlords to expect a quick fix. In an incorporation, that is generally misplaced. Gift holdover relief under TCGA 1992 s.165 is limited to business (trading) assets and shares in trading companies. An ordinary investment buy-to-let is neither, so s.165 holdover does not cover it. The relief landlords actually use on incorporation is s.162, not s.165 holdover. We unpack the distinction in our note on holdover relief on property incorporation, because mixing the two up is one of the most common and most expensive errors in this area.
What the reliefs do not switch off
Even a clean Section 162 claim leaves two costs in place. The company still pays SDLT (LBTT in Scotland, LTT in Wales) on its acquisition at market value, usually with the additional-dwellings surcharge, because incorporation relief is a CGT relief only. And the deferred gain is exactly that: deferred, not cancelled, sitting in the base cost of your shares until you sell them. The genuine "avoid CGT and SDLT on existing stock" move is not to transfer at all, but to leave existing properties personally and buy future properties through the company.
Direct transfer vs Section 162 relief vs buying new in the company
There are three routes, and the right one depends on whether your lettings clear the s.162 business test and on how much existing stock you would be moving. This is the comparison that should drive the decision:
| Route | CGT on existing property | SDLT / LBTT / LTT | Best for |
|---|---|---|---|
| Direct transfer, no relief | Due now at 18% / 24% on the full gain | Charged on the company purchase, usually with surcharge | Rarely the best route; only where the gain is small or covered by the annual exempt amount |
| Transfer with Section 162 relief | Deferred into the share base cost (claimed, not automatic) | Still charged, unless genuine partnership relief applies | An actively managed portfolio that meets the business test |
| Keep existing, buy new in the company | None: no disposal of existing stock | Charged only on genuinely new purchases | Most landlords with a small number of established personal properties |
For a single flat held passively, the third route is almost always cleaner: you avoid both the CGT disposal and the SDLT incorporation charge on what you already own, and you start building the corporate structure with new acquisitions. Our pillar guide on buy-to-let through a limited company covers the wider running-costs picture, and the focused page on incorporating rental property without CGT sets out the buy-new alternative in full.
The spouse route and the connected-persons traps
One legitimate planning step is to bring a spouse or civil partner into the ownership before incorporation. Transfers between spouses living together are no-gain-no-loss under TCGA 1992 s.58, so moving a share to your spouse does not itself trigger CGT, and it means two annual exempt amounts and two basic-rate bands are available when the property then goes into the company. It is genuinely useful where the numbers are large, and we cover the mechanics on our CGT on property transfer to a spouse page.
Two warnings, though. The receiving spouse takes over your original base cost, not a market value, so the deferred gain travels with the share. And the connected-persons rule that taxes the company transfer at market value also clogs any loss: a loss on a disposal to your own company can only be set against gains on disposals to that same company, never against your general gains. If a property is under water, model that before you move it, because the loss may be far less useful than you assume.
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Funding the transfer: the director's loan account
When you transfer property in exchange partly for cash rather than wholly for shares, the company often cannot pay cash up front, so the amount owed to you is recorded as a director's loan (a credit on your director's loan account). That balance can later be drawn down tax-free as the company repays it, which is a useful extraction route, but it interacts with the s.162 "wholly or partly for shares" condition and with the company's cash flow. Structuring the share-versus-loan split is one of the technical decisions that most affects the outcome; our guide to the director's loan account on a property company explains how it works and where it goes wrong.
Multiple properties and timing the transfer
Each property is a separate disposal, but you still get only one £3,000 annual exempt amount for the tax year, set against the total of all your gains. Spreading transfers across two tax years gives you two annual exempt amounts, and where you are not relying on s.162 it can also help you keep more of each year's gain inside the 18% band. The trade-off is that a phased move delays the point at which the whole portfolio sits in the company and complicates the relief and finance-cost position, so it suits a planned incorporation rather than a single-property switch. Our guide to timing a property portfolio incorporation sets out when phasing pays.
How this fits the wider incorporation decision
CGT on the transfer is only the entry cost. The reason landlords incorporate at all is usually the finance-cost position. Section 24 restricts mortgage interest relief for individual landlords to a basic-rate tax credit (20% for 2026/27), so higher-rate landlords are taxed on rent they never keep; a company deducts interest in full against profits. From 2027/28, Finance Act 2026 (Royal Assent 18 March 2026) introduces separate property income rates of 22% basic, 42% higher and 47% additional in England, Wales and Northern Ireland (Scotland sets its own rates), and the Section 24 reducer rises in step to 22%, so no new basic-rate wedge opens but the higher-rate squeeze remains. Weigh that against the company's own running costs and the CGT and SDLT entry charge before deciding. Our overview of claiming mortgage interest relief under Section 24 and the current CGT rates on property set out both sides.
One more current point: Making Tax Digital for Income Tax is now live. Landlords with qualifying income above £50,000 are in MTD ITSA from 6 April 2026, with the threshold dropping to £30,000 from April 2027 and £20,000 from April 2028. Whether you hold property personally or through a company changes how, and whether, MTD applies to that income, so build it into the incorporation decision rather than treating it as an afterthought.
When the CGT is due, and getting the numbers right
Where CGT is actually payable on the transfer, the disposal is a UK residential property disposal: you must file a CGT on UK property return and pay the estimated tax within 60 days of completion. A clean Section 162 claim can leave nothing to pay, but you still need the computation and a defensible valuation on file. The interaction of market-value rules, the business test, the SDLT charge, loss-clogging and the 60-day deadline is exactly where a wrong assumption becomes an expensive one. If the figures are material, it is worth having a specialist model the direct-transfer, Section 162 and buy-new routes side by side before you commit.