Incorporation Case Study: A 10-Property Portfolio with a £200k Mortgage

Incorporation case studies usually open with the answer the writer wants you to reach. This one does not. We modelled a real-shaped portfolio (the figures are illustrative, the structure is typical) and the honest verdict is that for this particular landlord, incorporating the whole portfolio today would cost more in upfront tax than it recovers for years. That is the useful lesson: the case for incorporation lives or dies on gearing and on what you do with the rent, not on the size of the portfolio.

What follows is the full working: the current personal position under Section 24, the capital gains tax and SDLT triggered by the transfer, where section 162 incorporation relief helps and where it does not, the partnership route to the SDLT charge, the director's loan that funds tax-free drawings, and how the 2027 property income rates shift the balance.

The portfolio: 10 properties, light gearing, income drawn

Our landlord, anonymised as Maya, owns ten buy-to-let properties across Greater Manchester and the West Midlands, acquired between 2015 and 2020. The shape of the portfolio is the whole point of the analysis, so the numbers matter:

• Current market value: £2,500,000 across the ten properties
• Original purchase cost: £1,800,000
• Latent capital gain: £700,000 (before allowable costs)
• Outstanding mortgage debt: £200,000, sitting across only three of the ten properties
• Net equity: £2,300,000
• Gross annual rent: around £156,000
• Other income: £85,000 of salaried employment, so Maya is a higher-rate taxpayer before the rent is counted
• What she does with the rent: she lives on it. This portfolio is income, not a reinvestment vehicle

Two features drive everything below. First, the gearing is low: £200,000 of debt against £2.5m of property is roughly an 8% loan-to-value, so Section 24 bites on only a small slice of the rent. Second, Maya draws the income rather than rolling it up. Both facts pull against incorporation, because the headline reason to incorporate, full mortgage interest relief on heavily geared property reinvested inside the company, barely applies here.

Maya's position under personal ownership

On personally held property, finance costs are no longer deductible from rental profit. Instead, Section 24 gives a basic-rate (20%) tax credit for the mortgage interest. Because Maya is only lightly geared, the restriction costs her relatively little: most of her rent has no associated finance cost at all. Her rough personal position looks like this:

• Gross rent: £156,000
• Allowable expenses (repairs, management, insurance, void costs): say £40,000
• Taxable rental profit: £116,000, taxed largely at the 40% higher rate today
• Section 24 mortgage interest restriction: applies to the interest on £200,000 of debt only, relieved at 20% rather than her marginal rate

From 6 April 2027 the picture changes in form but not much in substance for Maya. Property income moves onto its own rates of 22%, 42% and 47% under Finance Act 2026, so her higher-rate rental profit will be taxed at 42% rather than 40%. The Section 24 credit rises to 22% in step with the new basic rate, so no new wedge opens against her interest. These 2027 rates apply to landlords in England, Wales and Northern Ireland; only Scottish taxpayers sit outside the new structure. The net effect on Maya is a couple of percentage points more tax on her rental profit, not a structural shock.

What incorporation actually costs upfront

Moving the portfolio into a company is not a paper reorganisation. It is a disposal and an acquisition rolled together, and it triggers two taxes on the way in.

Capital gains tax on the transfer

Transferring property to your own company is a connected-party disposal at market value under TCGA 1992. The gain crystallises even though Maya receives no cash. On a £700,000 latent gain, taxed at the 24% higher residential rate after a single £3,000 annual exempt amount, the bare CGT bill would be substantial. This is the first reason piecemeal incorporation looks tempting and usually fails: spreading transfers across years gives a fresh £3,000 exemption annually, but £3,000 against a £700,000 gain is a rounding error, and drip-feeding properties breaks the relief that actually matters.

That relief is section 162 incorporation relief. Where a genuine property business is transferred to a company as a going concern, wholly or partly in exchange for shares, the gain is rolled into the base cost of those shares rather than taxed now. For an actively managed ten-property portfolio, qualifying as a business is plausible: HMRC looks for hands-on, time-intensive management, and Ramsay v HMRC [2013] is the case that defines the threshold. A single let parked with an agent would not qualify; ten properties under active management has a real argument.

One change catches landlords out. Since Finance Act 2026, section 162 relief is no longer automatic. For transfers on or after 6 April 2026 it must be claimed, by the first anniversary of the 31 January following the tax year of the transfer, and the old section 162A election to disapply the relief has been repealed. Miss the claim and the gain falls fully into charge. There is more detail in our guide to incorporating rental property without triggering CGT and on holdover relief on property.

SDLT: the cost section 162 does not touch

This is where most portfolio incorporations stall. Section 162 defers capital gains tax. It does nothing for Stamp Duty Land Tax. The company is treated as buying each property at market value and, because a company acquiring residential property always pays the additional-dwellings surcharge, SDLT lands at the standard residential bands plus 5% across the whole consideration. On £2.5m of property that is a six-figure charge, payable in cash, with no relief from section 162 to soften it.

Three points landlords frequently get wrong:

• Multiple Dwellings Relief is gone. MDR was abolished for transactions on or after 1 June 2024, so it cannot reduce the SDLT on a portfolio transfer. Anyone quoting MDR savings is working from a repealed relief.
• The surcharge is 5%, not 3%. The additional-dwellings surcharge rose from 3% to 5% for transactions on or after 31 October 2024.
• The six-dwellings rule may help, but check first. Where six or more dwellings are bought in a single transaction, they are automatically treated as non-residential for SDLT, so the non-residential bands apply and no surcharge is due. This is a statutory deeming, not an election, and it can materially cut the SDLT on a genuine bulk transfer. It depends on the transactions being correctly structured as a single linked transaction, so it is a point to model carefully rather than assume.

The partnership route to nil SDLT

There is one route that can reduce the SDLT to nil, and it is the one most often oversold. Under FA 2003 Schedule 15, transferring property from a genuine, pre-existing letting partnership into a connected company can reduce the chargeable consideration by the sum-of-lower-proportions calculation, potentially to zero. The word doing the work is genuine. HMRC expects a real partnership with substance: partnership tax returns under SA800, partnership accounts, joint borrowing on the mortgaged properties, and a track record (around two years is the working safe harbour) before the transfer. A three-year clawback under paragraph 17A reverses the relief if capital is withdrawn, and the section 75A anti-avoidance rule is HMRC's standard attack on partnerships created shortly before incorporation. Whether Maya can use this turns entirely on whether she has been running a real partnership, or just owns properties jointly. Our guide on whether your business qualifies as a partnership sets out the test.

Personal versus company: the side-by-side

The decision is a comparison, so here it is as one. None of these figures are advice for your portfolio; they show where the levers sit.

Feature	Personal ownership	Limited company (SPV)
Tax on rental profit (2026/27)	20% / 40% / 45% on profit (your marginal rate)	Corporation tax: 19% to £50,000, 25% above £250,000, 26.5% marginal band between
Tax on rental profit (from 6 Apr 2027)	22% / 42% / 47% property income rates	Unchanged corporation tax rates and bands
Mortgage interest relief	Basic-rate credit only (20%, rising to 22% in 2027) under Section 24	Full deduction against profit before corporation tax
CGT to set up the structure	None (you already own personally)	Disposal at market value; deferrable under section 162 if it qualifies
SDLT to set up the structure	None	Standard bands plus 5% surcharge, unless the partnership or six-dwellings route applies
Getting profit into your pocket	Already yours after income tax	Second layer: dividends taxed at 10.75% / 35.75% / 39.35%, or tax-free director's loan repayment
Best fit	Lightly geared portfolios where rent is drawn for income	Heavily geared higher-rate landlords reinvesting profit, or building for succession

Read across Maya's row and the verdict writes itself. She is lightly geared (so the full-interest-relief advantage is small) and she draws the rent (so the second layer of dividend or loan extraction matters). The corporate route earns its keep when interest relief is large and profit is reinvested. Neither is true here, and the upfront CGT and SDLT have to be recovered before the company starts paying its way.

The director's loan: the one feature that helps income-drawers

There is a counterweight, and it is the most under-appreciated part of incorporation. When you transfer property worth £2.5m into a company in exchange for shares worth a nominal amount, the difference is credited to your director's loan account: the company owes you that money. Drawing it down is a repayment of your own capital, not income, so it comes out tax-free until the balance is exhausted. For a landlord who needs the rent to live on, this can fund years of drawings without dividend or salary tax, which softens the second-layer problem that otherwise weighs against the company route.

The trap is exhaustion. Treat every month's rent as loan repayment and even a large opening balance runs down within a few years, at which point drawings flip to taxable dividends or salary, often sooner than the original plan assumed. Modelling the drawdown profile is part of the decision, not an afterthought. Our detailed walkthrough of the director's loan in a property company covers the mechanics and the section 455 points that apply when the account goes the other way.

One company or several SPVs?

If Maya does incorporate, the next question is structure. For a ten-property portfolio held for long-term letting and drawn for income, a single SPV is normally the cleaner answer: one set of accounts, one corporation tax return, one mortgage relationship to manage. Multiple SPVs earn their extra administration in specific cases, where a lender caps properties per borrower, where you want to ring-fence a development from the let portfolio, or where you intend to sell or gift parts of the estate separately and want clean share disposals rather than property sales. The driver is financing and exit planning, not portfolio size on its own.

Alternatives to a full incorporation

Whole-portfolio incorporation is rarely the only option, and for an income-drawer like Maya it is rarely the best first move.

• Incorporate nothing, retain personally. Given the light gearing and the modest 2027 rate uplift, doing nothing is a defensible answer. The Section 24 cost is small when only 8% of the portfolio is mortgaged.
• A mixed model: retain the existing portfolio, buy future property through a company. This sidesteps the upfront CGT and SDLT entirely. New acquisitions go into a company from day one (no disposal, no surcharge on a property she never owned personally), while the legacy portfolio stays put. It is the lowest-friction way to start building corporate scale.
• A genuine partnership first. If a real letting partnership can be established and operated with substance over time, the Schedule 15 route may later reduce the SDLT on a transfer. This is a multi-year plan, not a pre-incorporation tidy-up.
• Pension and timing. Maximising pension contributions reduces higher-rate income tax now and may change the marginal-rate picture that drives the whole comparison.

For the deeper version of these trade-offs, see our guides on incorporating a property portfolio in 2026 and on the 2027 tax rates and the incorporation decision.

Mortgages and the practical sequence

The £200,000 of debt is a smaller problem here than it would be on a heavily geared portfolio, but it still has to be resolved. Personal buy-to-let lenders generally do not permit a transfer to a company, so the three mortgaged properties either need lender consent or, more usually, refinancing onto limited-company products. Company lending typically requires a personal guarantee and a lower loan-to-value than personal lending, and the rate differs from personal products. Because only three of the ten properties are mortgaged, the refinancing exercise is contained.

If Maya proceeds, the order of operations protects the reliefs:

• Establish whether the lettings are a business and gather the evidence the section 162 claim will rest on.
• Obtain independent open-market valuations for all ten properties; they set both the gain and the SDLT.
• Resolve the three mortgages: consent or company refinance.
• Form the company and structure the consideration as shares plus a director's loan credit.
• Complete the transfers as a single going-concern transaction, file each SDLT return within 14 days of completion, and make the section 162 claim within the statutory window.
• Move onto company compliance, and check whether any retained personal property brings you within Making Tax Digital for Income Tax.

MTD for Income Tax is now live and runs on income, not profit: £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028. Property held inside a company sits outside MTD for Income Tax (it falls under corporation tax instead), but any property Maya keeps personally is measured against those thresholds, so a mixed model still needs MTD planning for the retained side.

The verdict on this portfolio

For this lightly geared, income-drawn ten-property portfolio, full incorporation today would crystallise a large CGT charge (deferrable under section 162 if it qualifies, but only deferred, not removed) and an unavoidable six-figure SDLT bill that no relief touches unless a genuine partnership already exists. The corporate advantages that justify those costs, full interest relief and reinvested profit, barely apply to Maya. The 2027 rates nudge the maths but do not change the conclusion. A mixed model (keep the legacy portfolio, route future purchases through a company) captures most of the upside with almost none of the upfront cost, and a director's-loan drawdown is the feature that would help most if she ever did transfer.

Change the inputs (raise the gearing to 70%, or assume the profit is reinvested rather than drawn) and the same portfolio flips to a clear incorporation case. That is the real lesson of this case study: the verdict is set by gearing and intent, not by the number of doors. If you want your own portfolio modelled on these lines, a specialist limited-company structuring and capital gains review is the place to start.