Moving a buy-to-let portfolio into a limited company is sold as the cure for Section 24. The part that catches landlords out is the entry bill. HMRC treats the transfer as a sale at market value, so it can trigger Capital Gains Tax on the transfer to a limited company, and the company pays a fresh round of Stamp Duty Land Tax on the way in. For many portfolios those two costs together run into five or six figures before a single pound of ongoing saving lands.
So the real question is not whether a company saves tax year to year. It usually does for the right landlord. The question is whether the saving recovers the cost of getting in, and how long that takes. This guide sets out every figure a proper incorporation cost calculation has to capture, where the two big costs can legitimately be removed, and how to read the answer.
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The two costs that decide whether incorporation pays
Everything else (formation fees, conveyancing, valuations) is small change next to two items. Get these wrong in your model and the whole decision is wrong.
| Cost | Who pays it | Charged on | Can it be removed? |
|---|---|---|---|
| Capital Gains Tax | You, personally | Gain since purchase, at market value on transfer | Yes, by Section 162 incorporation relief if a genuine business transfers for shares |
| Stamp Duty Land Tax | The company | Market value of each property acquired | Only by genuine partnership relief (FA 2003 Sch 15); otherwise payable in full |
Notice the asymmetry. The CGT route to relief (s.162) is automatic once the conditions are met and is open to a solo landlord running a real business. The SDLT route is far narrower: it needs a pre-existing letting partnership, not just a portfolio in one person's name. A landlord can therefore often defer the CGT and still face the full SDLT bill, which is exactly the trap of focusing only on capital gains.
Capital Gains Tax on transferring property to a company
When you put a property into your company, no cash changes hands, but HMRC deems a disposal at open market value under the connected-party rules. The gain is the current value less your original cost, plus the cost of capital improvements and the original acquisition costs. That gain is taxed at 18% to the extent it falls within your remaining basic-rate band and 24% above it, after deducting the annual exempt amount of £3,000 (2026/27).
A worked example shows how quickly this builds. Suppose you bought a flat for £200,000 and it is now worth £320,000. The £120,000 gain, less the £3,000 exemption, leaves £117,000. If you are already a higher-rate taxpayer, the whole £117,000 is taxed at 24%, which is £28,080 of CGT on one property. Stack three or four properties and the personal tax bill alone can pass £100,000, and it is payable through the 60-day UK property reporting service from completion of each transfer.
The variables your incorporation cost calculation must feed in:
- Original purchase price, acquisition costs and capital improvement spend for each property
- Current market value, ideally from a formal RICS valuation you can defend on enquiry
- Your other income in the year, which fixes how much gain falls in the 18% band before the 24% band takes over
- The £3,000 annual exempt amount, and a spouse's exemption where ownership is shared
- Any capital losses brought forward that can be set against the gains
Section 162 incorporation relief: CGT-free incorporation where it applies
This is the provision that makes CGT-free incorporation possible. Section 162 TCGA 1992 ("Roll-over relief on transfer of business", confirmed in force on legislation.gov.uk) gives automatic relief where you transfer the whole of a business as a going concern, together with all its assets other than cash, wholly or partly in exchange for shares. The gain is not charged on transfer; it is rolled into the base cost of the shares you receive, so tax is deferred until you eventually sell those shares.
The pinch point is the word "business". HMRC does not accept that simply owning let property is a business. It looks for genuine business activity: a portfolio of properties under active, time-consuming management, in the spirit of the threshold in Elizabeth Moyne Ramsay v HMRC [2013]. A single passively held buy-to-let almost never qualifies. A managed portfolio of several properties, with the owner doing the substantive work, has a real prospect. Our deeper note on Section 162 incorporation relief for property landlords works through the evidence HMRC expects to see.
Two practical points. First, s.162 relief is restricted to the proportion of consideration you take as shares, so if you take part of the value as cash or a loan, that proportion is not relieved. Second, because the relief deals only with CGT, it does nothing for the SDLT the company pays. People routinely conflate the two and assume "incorporation relief" means tax-free incorporation across the board. It does not.
Holdover relief and why it usually does not help residential portfolios
Holdover relief under s.165 TCGA 1992 is the other deferral people reach for, but for residential property it is largely a dead end. Section 165 holdover is limited to business (trading) assets, and residential letting is investment, not trade. So for a standard buy-to-let portfolio, s.165 is not available and s.162 is the route that matters. Our guide to holdover relief on property incorporation sets out the narrow cases where holdover genuinely applies, and our piece on how to incorporate rental property without CGT walks through the s.162 conditions in detail.
Stamp Duty Land Tax on incorporation
This is the cost most often underestimated. Your company is a separate purchaser, and a connected one, so it is treated as buying each property at market value. As a company acquiring residential property, it pays the standard residential rates plus the 5% additional dwellings surcharge from the first pound. The surcharge rose from 3% to 5% for transactions on or after 31 October 2024 (Finance (No.2) Act 2024), so any older calculator still showing 3% understates the bill.
The 2026/27 rates a company faces on a residential property in England or Northern Ireland:
| Portion of price | Standard rate | Rate for a company (with 5% surcharge) |
|---|---|---|
| Up to £125,000 | 0% | 5% |
| £125,001 to £250,000 | 2% | 7% |
| £250,001 to £925,000 | 5% | 10% |
| £925,001 to £1,500,000 | 10% | 15% |
| Above £1,500,000 | 12% | 17% |
One further trap: where a single dwelling costs the company more than £500,000, the flat 17% rate for non-natural persons under Schedule 4A FA 2003 can apply instead, unless a relief such as the property-rental-business relief is claimed. For genuine letting businesses that relief is normally available, but it must be claimed correctly on the return.
SDLT is calculated property by property, not on the portfolio as a whole, so a company taking on a £320,000 flat and a £450,000 house computes two separate charges. On that £320,000 flat the company would pay 5% on the first £125,000 (£6,250), 7% on the next £125,000 (£8,750) and 10% on the final £70,000 (£7,000), which is £22,000 of SDLT on a single property. Multiply across a portfolio and the SDLT often eclipses the CGT. Our standalone note on paying SDLT twice on incorporation explains why the charge bites even on property you already own.
The only route that removes the SDLT: genuine partnership relief
There is one legitimate way to reduce or remove the SDLT, and it is conditional. Where the portfolio is already held in a genuine letting partnership (with partnership tax returns, partnership accounts and joint borrowing in place before incorporation), FA 2003 Schedule 15 applies a sum-of-the-lower-proportions formula that can reduce the chargeable consideration, often to nil, when the partnership transfers to a company connected with the partners.
The bar is high and HMRC polices it hard. A husband-and-wife joint-ownership portfolio is not automatically a partnership, and a partnership created shortly before incorporation to access the relief invites a challenge under the s.75A general anti-avoidance rule, which lets HMRC ignore the partnership for SDLT. There is no quick fix here, and Multiple Dwellings Relief is no longer an option (it was abolished from 1 June 2024, so any source telling you to use MDR on portfolio incorporation is out of date). The mechanics, including the three-year anti-withdrawal trap, are covered in our partnership SDLT relief on incorporation guide.
Scotland and Wales charge their own transfer taxes
If your properties sit in Scotland or Wales, SDLT does not apply. Scotland charges Land and Buildings Transaction Tax (LBTT) via Revenue Scotland, with an Additional Dwelling Supplement of 8% on company purchases. Wales charges Land Transaction Tax (LTT) via the Welsh Revenue Authority, which has its own higher-rate band structure rather than a flat surcharge bolted on top. The bands and reliefs differ in each, so a mixed UK portfolio needs the right transfer tax modelled in each jurisdiction.
How to estimate your incorporation cost step by step
Pulling the pieces together, a realistic model runs in this order.
- Value each property and work out the gain. Current market value less original cost, capital improvements and acquisition costs. This drives both the CGT and the SDLT.
- Estimate the CGT. Apply 18% within your basic-rate band and 24% above, after the £3,000 exemption, then test whether s.162 relief defers it.
- Estimate the SDLT the company pays. Run each property through the company rate table above, then test whether genuine partnership relief applies.
- Add the one-off costs. Conveyancing per transfer, formal valuations, company formation, plus new company buy-to-let mortgages and any early repayment charges on the personal loans being redeemed.
- Compare against the annual benefit. Set the total against the yearly saving from full mortgage-interest deduction inside the company, and work out the payback period.
Modelling the financing matters as much as the tax. The cash to pay any CGT and SDLT has to come from somewhere, and the usual options are a director's loan (you leave value owed to you by the company, then draw it back tax-free from rental profits before taking dividends), refinancing to release equity, or phased incorporation across tax years. Each has a different effect on cash flow and on whether s.162 relief survives, since s.162 generally needs the whole business to move together. Be alert to the director's loan exhaustion trap: drawing monthly rent as loan repayments can clear a large credit balance within a few years, after which extraction reverts to dividends at the higher dividend rates.
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Incorporation versus staying personal under Section 24
The reason landlords look at this at all is Section 24, which restricts an individual landlord's mortgage interest to a 20% basic-rate tax credit rather than a full deduction. A company is outside Section 24 and deducts its finance costs in full against profits. That is the structural advantage, and the higher your gearing and marginal rate, the bigger it is.
| Factor | Personal ownership (Section 24) | Limited company |
|---|---|---|
| Mortgage interest | 20% basic-rate credit only | Fully deductible against profit |
| Tax on profit | Income tax at your marginal rate | Corporation tax (19% to 25% by profit) |
| Getting profit out | Already yours | Extra tax on dividends or salary |
| Cost to set up | None | CGT and SDLT on transfer |
| Best suited to | Low gearing, soon-to-sell, lower profits | Higher gearing, higher rate, long hold |
The trade-off is that a company taxes you again when you take the money out, through dividends or salary, so the headline corporation tax saving is not the whole picture. A landlord who needs all the rental income to live on captures less of the benefit than one reinvesting profits to grow the portfolio. We compare the two routes in depth in Section 24 versus incorporation: which saves more tax, and the wider go or no-go decision in should I incorporate my buy-to-let portfolio.
When incorporation does not pay
Incorporation is not the default right answer, and a good calculation often points the other way. Take a landlord with two lightly geared properties, modest rental profits and gains that have not run far. The transition might cost £40,000 in CGT and SDLT to chase an annual saving of a couple of thousand pounds. The payback could be fifteen or twenty years, longer than they intend to hold, and that is before the cost of extracting profit from the company. For them, staying personal and managing Section 24 through other levers is the better outcome.
The cases that genuinely benefit tend to share a profile: higher-rate taxpayer, meaningful gearing so the full interest deduction is worth a lot, a long intended hold so the saving compounds, and ideally a portfolio that qualifies for s.162 relief and (better still) sits in a partnership that can access SDLT relief. The further you are from that profile, the more the upfront cost dominates.
The April 2027 rate change and what it does not change
From 6 April 2027, Finance Act 2026 introduces separate property income tax rates for individuals of 22% basic, 42% higher and 47% additional, applying in England, Wales and Northern Ireland (only Scotland is carved out for 2027/28). Crucially, the Section 24 finance-cost credit rises in step to 22%, so for a basic-rate landlord no new wedge opens, and for higher and additional-rate landlords the credit improves slightly while the finance-cost wedge stays broadly where it is. This nudges the calculation for some geared higher-rate landlords but it does not alter the upfront CGT and SDLT that incorporation triggers. We cover the planning angle in the 2027 tax rates and the incorporation decision.
Get the numbers modelled before you commit
An incorporation decision turns on figures that are specific to you: your gains, your gearing, your marginal rate, whether your activity is a business for s.162 and whether your ownership is a partnership for SDLT. A generic calculator gives you an order of magnitude; it cannot tell you whether s.162 relief is safe to claim, whether your partnership will survive a s.75A challenge, or whether phasing breaks the relief. Those are the points that decide whether incorporation creates value or simply moves cash to HMRC. Run the full model, on your own portfolio, before you transfer anything.
Related Reading
- How to Transfer Property Into a Limited Company UK: Complete Guide for Landlords
- Section 162 Incorporation Relief for Property Landlords
- SDLT on Incorporation: Why You Can Pay Stamp Duty Twice
- Section 24 vs Incorporation: Which Saves More Tax
- Incorporation Timing: When to Incorporate a Property Portfolio