Incorporating a Property Portfolio: A Phased Approach for Existing Landlords

Many established landlords reach the same crossroads. Section 24 has eroded the after-tax return on a geared personal portfolio, and a limited company looks more attractive. The problem is the cost of getting there. Transferring several properties at once can trigger a large capital gains tax bill, a 5% stamp duty land tax surcharge on each property, and a wave of refinancing all in the same window. A phased approach is how landlords manage that transition deliberately rather than absorbing it as a single shock. This guide explains how the mechanics actually work in 2026/27, where the genuine reliefs sit, and where the common traps catch people out.

Phasing is not a single technique. It can mean spreading individual disposals across tax years, sequencing refinancing around mortgage expiry, or qualifying the lettings as a business first and then making one clean incorporation. Which version is right depends entirely on your gains profile, your gearing and whether the portfolio is genuinely run as a business. Getting the order wrong can forfeit relief you would otherwise have had, so the planning matters more than the speed.

Why a Phased Approach Makes Sense

Incorporating an entire portfolio in a single transaction concentrates three separate tax and finance events into one moment. Each property transfer is a disposal for capital gains tax, treated as taking place at market value because you and the company are connected persons. Each transfer is also a chargeable transaction for stamp duty land tax, again at market value under section 53 of the Finance Act 2003, with the 5% additional dwellings surcharge on top. And each property usually needs new lending, because personal buy-to-let mortgages do not move across to a company.

A phased approach lets you separate those events and deal with them at points that suit your circumstances. Spreading transfers across tax years can mean using more than one annual exempt amount for CGT. Sequencing around mortgage product expiry avoids paying early repayment charges to refinance ahead of schedule. And testing the company structure with part of the portfolio first reduces the risk of committing everything before you have lived with company ownership.

This approach tends to suit landlords who:

• Own several properties with meaningful, varied capital gains
• Are geared, so Section 24 is materially reducing their personal after-tax return
• Have mortgage products expiring at different times across the portfolio
• Want to keep some properties in personal ownership, for example a future main residence
• Need to manage the cash flow impact of CGT and SDLT rather than fund it all at once

The CGT Position on Transfer

When you transfer a property to your own company, capital gains tax is the first cost to model. Because you and the company are connected, the disposal is treated as taking place at the property's market value, not at any lower figure you might choose. The gain is the difference between that market value and your base cost, after deducting allowable acquisition and improvement costs.

For 2026/27 the residential property CGT rates are 18% for gains falling within the basic-rate band and 24% for gains above it, following the Autumn Budget 2024 change. The annual exempt amount is 3,000 pounds per individual, far below the 6,000 pounds that applied in 2023/24 and the 12,300 pounds before that. A jointly owned property gives each owner their own annual exempt amount, so a couple has 6,000 pounds of combined exemption per year. Where capital gains tax is due, the disposal must be reported and the tax paid within 60 days of completion through HMRC's UK property service.

Worked Example: Spreading Disposals Across Years

Consider a higher-rate taxpayer who owns four let properties personally, each standing at a gain of roughly 40,000 pounds. Transferring all four in one tax year produces a 160,000 pound gain in that year, against a single 3,000 pound annual exempt amount. Transferring one property a year instead lets the landlord set the annual exempt amount against each year's smaller gain. The total gain is the same, but four annual exemptions are used instead of one, and the timing of the tax outflow is spread to match refinancing.

The figures above are illustrative round numbers to show the mechanism, not a quoted outcome. The size of the benefit from spreading depends on whether the gains keep the landlord within the basic-rate band in any year (unlikely for most higher-rate landlords once rental and other income is counted) and on whether incorporation relief is in play, which changes the analysis entirely.

Section 162 Incorporation Relief: The Key Question

The single most important factor in any portfolio incorporation is whether Section 162 incorporation relief is available. Under section 162 of the Taxation of Chargeable Gains Act 1992, where a person transfers a business as a going concern to a company, together with the whole of the assets of the business other than cash, wholly or partly in exchange for shares, the gain is not charged on transfer. Instead it is rolled into the base cost of the shares the company issues, deferring the CGT until the shares are eventually disposed of.

The relief is automatic where the conditions are met, but the conditions are demanding for landlords. HMRC's position is that residential letting must amount to a business, not merely passive investment, and the leading authority is Ramsay v HMRC [2013] UKUT 226 (TCC), where a portfolio under genuinely active management qualified. The degree of activity matters: time spent, the number of properties, active management rather than handing everything to an agent. A handful of passively held lets typically will not qualify.

This is where phasing collides with relief. Section 162 requires the whole business to be transferred as a going concern. A deliberate strategy of moving one property a year as a string of separate disposals can defeat the relief, because no single transfer represents the whole business and each individual transfer is simply a connected-party disposal at market value. Landlords who want both incorporation relief and a managed transition usually achieve it by transferring the whole qualifying business in one step once it qualifies, and phasing the surrounding work (refinancing, restructuring, profit extraction) rather than phasing the disposals themselves. If incorporation relief is your goal, decide the structure before you transfer the first property, not after.

It is also worth knowing that section 162 defers the CGT but creates a credit balance on the director's loan account equal to the value transferred for shares, which can later be drawn down tax-free as the company repays it. Our complete guide to buy-to-let limited companies covers how that interacts with profit extraction over time.

Stamp Duty Land Tax on Each Transfer

SDLT is the cost that surprises most landlords, because incorporation relief deals with the CGT but does nothing for stamp duty. Each transfer of a residential property to a connected company is a chargeable transaction at market value, and the 5% additional dwellings surcharge applies on top of the standard residential rates in England and Northern Ireland. The surcharge rose from 3% to 5% for transactions on or after 31 October 2024 (announced at the Autumn Budget 2024 and enacted in Finance Act 2025), so older guidance quoting a 3% figure is out of date.

The standard residential rates with the surcharge, for England and Northern Ireland from 1 April 2025, are set out below.

Portion of price	Standard rate	Rate including 5% surcharge
Up to 125,000 pounds	0%	5%
125,001 to 250,000 pounds	2%	7%
250,001 to 925,000 pounds	5%	10%
925,001 to 1,500,000 pounds	10%	15%
Above 1,500,000 pounds	12%	17%

Crucially, Multiple Dwellings Relief was abolished for transactions with an effective date on or after 1 June 2024 under Finance (No.2) Act 2024, with anti-forestalling rules to block late claims. Any guidance suggesting you can use MDR to soften the SDLT on a portfolio transfer is wrong for current transactions. There are, however, two routes within the SDLT code that genuinely help in the right circumstances.

The Six-Dwellings Rule

Under section 116(7) of the Finance Act 2003, where a single transaction involves the transfer of six or more separate dwellings, those dwellings are automatically treated as non-residential property for SDLT. Non-residential rates then apply (0% up to 150,000 pounds, 2% from 150,001 to 250,000 pounds, and 5% above 250,000 pounds), and the additional dwellings surcharge does not apply at all. This is a statutory deeming rather than an election, so no claim is required, but it depends on six or more dwellings moving in a single bulk transaction. For a larger portfolio incorporated in one step, this can change the SDLT analysis materially. Our guide to the six-dwellings rule for portfolio transfers sets out how it works in practice.

The Genuine Partnership Route

Where a portfolio is already held in a real, pre-existing letting partnership, the chargeable consideration on transfer into a connected company can be reduced, potentially to nil, under the sum of the lower proportions formula in Schedule 15 of the Finance Act 2003. This is the route specialist advisers most often discuss for serious portfolio landlords, but it carries strict conditions. The partnership must be genuine and pre-existing, with partnership tax returns filed under SA800, partnership accounts and joint borrowing. HMRC will challenge a partnership formed shortly before incorporation under the anti-avoidance rule in section 75A of the Finance Act 2003, treating it as a contrivance to access the relief. A husband-and-wife joint-ownership arrangement is not automatically a partnership for this purpose. Our detailed analysis of the Schedule 15 partnership SDLT relief and the sum of the lower proportions explains the mechanics and the genuine-business threshold.

The Income Tax Picture During the Transition

During a phased incorporation you run two tax regimes side by side, and understanding the difference is what makes the case for incorporating in the first place.

For the properties still held personally, Section 24 applies in full. Finance costs are not deducted from rental profit; instead a basic-rate tax credit is given, at 20% for 2026/27. From 2027/28, under Finance Act 2026, England and Northern Ireland move to separate property income rates of 22% basic, 42% higher and 47% additional, and the Section 24 reducer is given at the new 22% property basic rate rather than staying frozen at 20%. For a basic-rate landlord the reducer matches the rate, so no new wedge opens; for higher and additional-rate landlords the reducer rises from 20% to 22% but still sits far below their marginal rate, leaving most of the finance-cost restriction in place. Our pillar on the 2027 property income tax rates sets out the full position.

For the properties already inside the company, Section 24 does not apply at all. The company deducts mortgage interest in full as a business expense before corporation tax, which is precisely why geared higher-rate landlords look at incorporation. The transition period is therefore the point at which you can see both treatments running on the same portfolio.

Refinancing: The Practical Constraint

Tax usually decides whether to incorporate; finance usually decides the pace. Personal buy-to-let mortgages do not transfer to a company. Each property has to be redeemed and replaced with a limited-company buy-to-let facility, and company lending typically applies different criteria, deposit levels and rates than personal lending. Three points shape a phased plan in practice:

• Early repayment charges. Redeeming a fixed-rate personal mortgage before its term ends can trigger an early repayment charge. Sequencing transfers to coincide with product expiry avoids paying to refinance ahead of schedule.
• Lending capacity. Limited-company lending criteria can differ from personal criteria, and not every property or every landlord will refinance on the same terms inside a company. This can dictate which properties move first.
• Personal guarantees. Most limited-company buy-to-let lending requires personal guarantees from the directors, so incorporation does not remove personal exposure to the borrowing.

Because of all this, the natural rhythm of a phased incorporation is often to move properties as their mortgage products expire, rather than on a fixed annual calendar. The timing of incorporation is frequently driven as much by the finance window as by the tax year.

Running a Mixed Personal and Company Structure

A phased incorporation means living with a mixed structure for a period, and some landlords keep one permanently. That brings ongoing administrative weight.

Records and Compliance

You maintain personal rental records for the properties still held individually and statutory company accounts for those inside the company. While properties remain in personal ownership, your rental income counts towards the Making Tax Digital for Income Tax thresholds. MTD for Income Tax is being introduced from 6 April 2026 for those with combined qualifying income over 50,000 pounds, from 6 April 2027 over 30,000 pounds, and from 6 April 2028 over 20,000 pounds. As properties move into the company, they leave your personal qualifying income, which can change your MTD position over the phasing period. Companies themselves are not within MTD for Income Tax. Our explainer on the MTD qualifying income test covers how the threshold is measured.

Two Tax Returns, Two Regimes

Expect more complex filing during transition years: personal self-assessment for the personally held properties under Section 24, and company corporation tax returns for the incorporated properties with full interest relief. The two regimes tax the same kind of income very differently, which is the whole point, but it doubles the compliance work for the duration.

Extracting Profit From the Company

Money inside the company is not yet money in your hand. Profit comes out through a director's loan account repayment where an incorporation-relief credit balance exists (tax-free until exhausted), then dividends and salary, each with its own tax treatment. Planning extraction is part of the incorporation decision, not an afterthought, and the credit balance created by Section 162 relief is a valuable but finite resource.

Planning the Eventual Exit Before You Incorporate

One trap deserves its own attention. Property held in a company can be sold two ways: the company sells the property as an asset sale, or the shareholders sell the company shares. An asset sale brings SDLT for the buyer and corporation tax on any gain inside the company, with a further tax cost to extract the proceeds to you personally. A share sale avoids SDLT on the land but is a CGT disposal of your shares. The expensive mistake is to transfer in, pay the 5% surcharge, then later pull a property back out into personal ownership and pay tax again. Decide how you expect to exit, by sale, by passing shares to the next generation, or by long-term holding, before you transfer the first property. Our complete guide to capital gains tax on property covers the disposal side in depth.

How a Phased Incorporation Typically Sequences

There is no single correct sequence, but a considered plan usually works through the following before any property moves:

• Establish whether the lettings are a business for Section 162 purposes, because that decision shapes whether you phase disposals or phase the surrounding work around a single whole-business transfer.
• Model the CGT and SDLT on each property at market value, including whether the six-dwellings rule or a genuine partnership route applies.
• Map mortgage product expiry dates across the portfolio to find the natural refinancing windows.
• Decide the company structure, including share classes and who holds them, before incorporation rather than retrofitting it.
• Plan profit extraction and the eventual exit, so the structure you build is the one you actually want to live with.

The order of these steps is deliberate. The Section 162 question comes first because it determines almost everything that follows, including whether phasing the disposals is even compatible with the relief you are relying on.

Where Professional Support Matters Most

A phased incorporation pulls CGT, SDLT, corporation tax, Section 24, refinancing and your eventual extraction strategy into the same plan, often spanning more than one tax year. The decisions that carry the most cost happen before anything moves: whether the portfolio qualifies as a business, whether to phase disposals or transfer the whole business in one step, whether a genuine partnership route is realistically open, and how to avoid triggering the surcharge or an effective double charge on exit. These are not points you want to discover after the first transfer has completed. Specialist input at the planning stage, modelling your actual numbers, is where the value sits.

Related Reading

• Landlord Incorporation: Step-by-Step Guide
• Incorporation Timing: When to Incorporate a Property Portfolio
• Incorporation Costs: Understanding the CGT and SDLT Implications
• Partnership SDLT Relief Under Schedule 15 FA 2003