Incorporation Case Study: 5-Property Portfolio Analysis

The question is not whether a limited company beats personal ownership in the abstract. It is whether, for one specific portfolio, the corporation tax saving on geared rental profit outweighs a one-off capital gains tax and stamp duty cost that can run well into five figures, and keeps outweighing it once you account for the tax of getting profits back out. This case study walks one five-property portfolio through that calculation end to end, under the rules as they stand for 2026/27, so the trade-offs are visible rather than asserted.

The portfolio: a worked example

Our landlord, anonymised here as a higher-rate taxpayer with an employment income alongside the lettings, holds the following:

• Five buy-to-let properties across Greater Manchester and the West Midlands
• Gross rental income of £85,000 a year
• Annual mortgage interest of £28,000
• Other allowable expenses of £12,000
• Employment income of £65,000
• Combined open market value of £900,000 with around £450,000 of equity
• Properties acquired between 2018 and 2022, so all standing at a gain

This is the profile where incorporation is genuinely arguable: a higher-rate landlord, materially geared, with rental profit large enough for the corporation tax saving to matter, and a holding period long enough to recover the cost of transfer. A basic-rate landlord, or a low-geared portfolio, would usually reach the opposite conclusion, and that is the point. The right answer is portfolio-specific.

The Section 24 cost under personal ownership

Section 24 is the engine behind almost every portfolio incorporation. An individual landlord can no longer deduct mortgage interest from rental profit. Instead, the interest is added back, taxed at the landlord's marginal rate, and then partially relieved by a 20% basic-rate tax reducer. For a higher-rate taxpayer that leaves a 20 percentage point gap between the rate paid on profit and the 20% credit, and that gap is the cost a company simply does not bear.

Running the numbers under personal ownership for 2026/27:

• Gross rent: £85,000
• Less other allowable expenses: £12,000
• Taxable rental profit (before any finance relief): £73,000
• Mortgage interest of £28,000 is not deducted from profit; it attracts a 20% reducer worth £5,600

The £73,000 of rental profit stacks on top of £65,000 of employment income. Most of it falls in the higher-rate band, and a slice pushes towards the £100,000 personal allowance taper, where the effective marginal rate spikes to 60%. The 20% reducer on the £28,000 of interest claws back £5,600, but the landlord has effectively been taxed at 40% (and on part of the income, 60%) on interest that produced no economic profit. That is the structural unfairness Section 24 created, set out in full in our guide to claiming mortgage interest relief.

Looking ahead, from 6 April 2027 property income in England, Wales and Northern Ireland is taxed at 22%, 42% and 47% under Finance Act 2026, and the Section 24 reducer rises in step to 22%. Because the reducer tracks the new basic rate, no new basic-rate wedge opens, but the higher-rate landlord's finance-cost gap stays roughly where it is. Section 24 is not going away, and for a geared higher-rate landlord it does not get easier. Our Section 24 versus incorporation comparison isolates this lever on its own.

The company tax position

Inside a company, mortgage interest is deducted in full as it always has been. Section 24 is an income tax rule and does not apply to corporation tax. The company's profit is therefore:

• Gross rent: £85,000
• Less all allowable expenses including the full £28,000 mortgage interest: £40,000
• Company profit: £45,000

Corporation tax is not a single flat rate. Since 1 April 2023 there are three figures under the Finance Act 2021 architecture: a 19% small-profits rate up to £50,000 of profit, the 25% main rate above £250,000, and an effective 26.5% marginal rate on the slice in between, delivered through marginal relief. On £45,000 of profit our landlord sits inside the small-profits band, so the company pays 19%, around £8,550, leaving roughly £36,450 retained.

That is the headline appeal: £36,450 retained in the company against a much heavier personal tax bill on the same lettings. But two qualifications change the picture, and both are routinely missed.

The associated-companies trap if you use multiple SPVs

The £50,000 and £250,000 corporation tax limits are not per company. They are divided by the number of associated companies under common control. A landlord who runs the five properties through five separate special purpose vehicles finds each SPV's small-profits limit cut to £10,000 (£50,000 divided by five) and each upper limit cut to £50,000. Most of the 19% band disappears, and modest profits get taxed into the 26.5% marginal band per company.

This is the single most common misunderstanding in multi-SPV planning: "each of my companies gets its own £50,000 band" is wrong. Separate SPVs make sense for ring-fencing finance and for a clean sale of one property without disturbing the others, but they cost you the small-profits rate. One company keeps the full bands and mixes the properties together. The decision between one company and several SPVs is driven by financing and exit strategy, not by tax efficiency alone.

The cost of getting the money out

The £36,450 retained inside the company is not the landlord's to spend. Extracting it triggers a second layer of tax that personal ownership never had. For 2026/27 there is a £500 dividend allowance, then dividends are taxed at 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band. A higher-rate landlord drawing the full retained profit as a dividend pays a further charge on top of the corporation tax already suffered, set out in our guide to extracting cash from a property company.

This is why incorporation rewards the landlord who can leave profits in the company to reinvest, fund deposits, or pay down debt, and rewards far less the landlord who needs every pound of rent to live on. If the money has to come out at the higher dividend rate every year, the combined corporation-tax-plus-dividend cost narrows the gap against personal ownership considerably.

Personal ownership versus a company: side by side

The table below sets the two structures against each other on the points that actually decide the question. No figures are advice for any particular reader; they illustrate the mechanics for this portfolio.

Factor	Personal ownership	Limited company
Mortgage interest relief	Restricted to a 20% basic-rate credit (Section 24)	Deducted in full from profit
Tax on rental profit	20% / 40% / 45% income tax at marginal rate	19% / 26.5% / 25% corporation tax by band
Second layer on extraction	None, the income is already yours	Dividend tax (10.75% / 35.75% / 39.35%) or salary tax
Reinvesting profit	From after-tax personal income	From profit taxed only at the lower corporation rate
Cost to set up	Already owned, no transfer cost	SDLT at open market value plus CGT on the deemed disposal
CGT on transfer	Not applicable	Deemed disposal; s.162 relief may defer it
Ongoing compliance	Self Assessment, MTD for Income Tax from April 2026	Company accounts and a CT600 corporation tax return
Inheritance tax	Property in the estate	Shares in the estate; planning routes via share classes

The one-off cost of transferring: SDLT and CGT

Personal ownership has no entry cost because you already own the assets. A company structure has a large one, and it is the figure that sinks most incorporation cases that look attractive on the annual saving alone.

Stamp Duty Land Tax on the transfer

Transferring property to a company you control is a connected-party transaction, so SDLT is charged on the open market value of the properties even though no money changes hands. The full residential rates apply, plus the 5% additional-dwellings surcharge that has applied to transactions on or after 31 October 2024. On a portfolio worth £900,000, the SDLT bill is substantial, and it is payable in cash within 14 days of completion regardless of the absence of a sale.

There are limited routes to reduce it. The six-or-more-dwellings rule under FA 2003 s.116(7) allows non-residential rates for a single transaction involving six or more separate dwellings, but our landlord has five, so it does not apply. Multiple Dwellings Relief was abolished for transactions on or after 1 June 2024 and is no longer available. The one mainstream route is partnership incorporation under FA 2003 Schedule 15, where a genuine, pre-existing letting partnership transfers the portfolio and the chargeable consideration is reduced under the sum-of-the-lower-proportions calculation, potentially to nil. That requires real partnership substance (partnership tax returns, partnership accounts, joint borrowing) and HMRC treats a partnership created shortly before incorporation as a contrivance. It is not a route a standard joint holding can simply opt into.

Capital gains tax on the deemed disposal

The transfer is also a disposal for capital gains tax at open market value. With the properties standing at a gain since 2018 to 2022, a chargeable gain crystallises across the portfolio, taxed at the residential rates of 18% within the basic-rate band and 24% above it, after the annual exempt amount of £3,000 for 2026/27. That could be a five-figure CGT charge on top of the SDLT, payable through the 60-day UK property reporting service.

This is where incorporation relief under TCGA 1992 s.162 earns its keep. Where a genuine property business is transferred as a going concern, wholly or partly in exchange for shares, s.162 defers the gain by rolling it into the base cost of the shares received. For transfers on or after 6 April 2026 the relief is no longer given automatically: Finance Act 2026 s.39 amended TCGA 1992 s.162(1) so the transferor must claim it in the self-assessment return for the tax year in which the transfer takes place, and the same provision omitted the old s.162A election to opt out. It is not an exemption; the gain resurfaces if and when the shares are sold. The condition that catches landlords out is the "business" test: HMRC requires genuine business activity, usually a portfolio of multiple properties under active management, with the time and effort of running a business rather than passively holding investments. The leading authority, Ramsay v HMRC, confirmed that an actively managed portfolio can qualify. A five-property portfolio under active management is a reasonable candidate, but the position must be evidenced and confirmed before transfer, not assumed. We set out the relief in detail in our guide to incorporation relief and property and the full transfer mechanics in how to transfer property into a limited company.

One point of confusion is worth clearing up. Holdover relief under s.165 is a different relief, for gifts of business assets, and it does not apply to investment-company shares or to passive let property. For a portfolio incorporation, s.162 is the relevant relief, not s.165.

The director's loan account: a hidden lever

How you take the consideration on transfer shapes how you can extract money for years afterwards. If you transfer property worth more than the value of the shares you receive, the company owes you the difference, and that credit balance is your director's loan account. The company can repay it to you tax-free over time, rent receipt by rent receipt, which is one of the most efficient extraction routes available to a property company owner.

There is a tension with s.162, though. Incorporation relief requires the consideration to be wholly or mainly shares, so taking a large director's loan instead of shares reduces or removes the relief and brings the CGT charge back into play. The trade-off is between deferring the gain (more shares, smaller or no loan account) and creating a tax-free extraction route (a larger loan account, less relief). Getting this balance right is the heart of structuring the incorporation, and it is not a decision to make after the event. The director's loan account also interacts with the s.455 close-company loan charge in the opposite direction: if the company lends money to the director rather than the other way round, an unpaid balance attracts a 35.75% charge for loans made on or after 6 April 2026. Our note on calculating CGT on transfer to a company shows how the share-versus-loan split feeds the numbers.

Making Tax Digital and ongoing administration

Compliance is a secondary factor, but it is no longer trivial. Making Tax Digital for Income Tax is live from 6 April 2026 for individual landlords with qualifying income above £50,000, extending to £30,000 from 6 April 2027 and £20,000 from 6 April 2028. Our landlord's £85,000 of gross rent is comfortably above the first threshold, so under personal ownership the portfolio falls into quarterly MTD reporting from April 2026.

A company does not report through MTD for Income Tax; it files a corporation tax return and statutory accounts. For a landlord already facing the administrative step-up of MTD quarterly updates across a sizeable personal portfolio, the company route can be the tidier compliance path, with established bookkeeping and a single annual corporation tax cycle. That is a convenience point, not a reason to incorporate on its own, but it is a real one for larger portfolios.

Putting it together: does this portfolio incorporate?

For this landlord, the annual corporation tax position is materially better than personal ownership because the portfolio is geared and the owner is a higher-rate taxpayer, exactly the profile Section 24 penalises. The case for incorporation strengthens further because the landlord intends to grow the portfolio and can leave profits inside the company to fund future deposits, which sidesteps the dividend layer of tax.

Against that sit two large one-off costs, SDLT at open market value with the 5% surcharge, and capital gains tax on the deemed disposal, the latter deferrable through s.162 only if the business test is genuinely met. The honest conclusion is conditional: incorporation is likely worthwhile here provided s.162 relief applies to defer the CGT and the landlord holds long enough to recover the SDLT, but it would be the wrong move for a basic-rate landlord, a low-geared portfolio, or anyone planning to sell within a few years.

The decision turns on a small number of variables, gearing, marginal rate, holding period, growth plans, and whether the s.162 business test is met, and the figures shift sharply with each. That is why a generic rule of thumb (often quoted as a profit threshold) is unreliable, and why the analysis is worth doing properly for your own numbers. For the timing dimension, our guide to when to incorporate a property portfolio covers the points to test before committing, and for a larger, more heavily mortgaged comparison see our ten-property case study.

Key takeaways

• Incorporation wins for geared, higher-rate landlords because a company escapes Section 24 entirely; it rarely wins for basic-rate or low-geared portfolios.
• Corporation tax is three figures (19% / 26.5% / 25%), and using several SPVs divides the bands across associated companies, costing you most of the small-profits rate.
• The benefit narrows once dividend tax on extraction is counted, so incorporation suits landlords who can retain and reinvest profit.
• The transfer triggers SDLT at open market value with the 5% surcharge and CGT on a deemed disposal; s.162 incorporation relief can defer the CGT only where a genuine business is transferred.
• The share-versus-director's-loan split set at transfer governs both the relief and your future extraction, so it has to be decided before the transfer, not after.

The mechanics in this case study are general and the figures illustrative. Before transferring any property into a company, the s.162 business test, the SDLT exposure, and the share-versus-loan structure should be confirmed against your own portfolio and intentions.