Transfer Properties to a Limited Company in Phases

Moving a rental portfolio into a limited company does not have to happen in a single weekend. A phased transfer spreads the properties across several tax years, a few at a time, and that pace can make the capital gains tax and the workload more manageable. It also lets a cautious landlord test company ownership on one or two properties before committing the rest.

But phasing carries one consequence that decides most of the planning: moving properties piecemeal forfeits section 162 incorporation relief, the only relief that defers the capital gain on incorporation. Section 162 needs the whole business to transfer at once. Take it one property at a time and you crystallise a gain on every move. That trade-off, control and cash flow against an immediate tax bill, is what this guide is really about.

What a phased transfer actually is

A phased transfer means transferring rental properties into your company in stages, typically one or two per tax year, rather than incorporating the whole portfolio in one transaction. Each property moves on its own timetable, with its own valuation, its own legal transfer and its own SDLT return. Over two to four years the portfolio migrates from personal to corporate ownership.

This is distinct from two related routes. Whole-portfolio incorporation moves everything in a single transfer, which is the only version that can qualify for section 162 relief. Selective incorporation moves some properties permanently and leaves others in personal ownership for good. Phasing usually ends with the whole portfolio inside the company; selective incorporation deliberately keeps a foot in both camps. The tax mechanics of the individual transfers are the same in each case.

The section 162 trap: why phasing changes the tax

This is the single most misunderstood point about phased transfers, so it is worth being precise. Section 162 TCGA 1992 rolls a capital gain over into the base cost of the new company shares where the whole of a business, other than cash, is transferred to the company as a going concern in exchange for shares. Verified against legislation.gov.uk at the time of writing, the relief was also changed by Finance Act 2026: for transfers on or after 6 April 2026 it is no longer automatic and must be claimed, by the first anniversary of the 31 January following the tax year of the transfer (TCGA 1992 s.162(1)(b), inserted by FA 2026 s.39).

The phrase that matters is "the whole of a business". A phased or selective transfer, by definition, does not move the whole business in one go, so section 162 cannot apply to the individual transfers. Every property you move is instead a disposal at market value to a connected company, and a capital gain crystallises immediately. There is no way to phase and still defer the gain under section 162; the two are mutually exclusive.

There is a further threshold even for whole-portfolio incorporators: HMRC tests whether your lettings are a genuine business rather than passive investment. The leading authority is Ramsay v HMRC [2013], which looked at the degree of active, time-intensive management. A single let or a lightly managed pair of flats will struggle to meet it. So the choice is not simply phased-versus-whole; it is phased-with-CGT-now versus whole-portfolio-with-section-162-if-you-qualify.

Capital gains tax on each transfer

Because phased transfers do not get section 162 relief, capital gains tax is the headline cost. Current CGT rates on residential property are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers (unified into TCGA 1992 s.1H by Finance Act 2024), charged on the gain after the annual exempt amount of £3,000. The gain is the market value at transfer less your base cost, regardless of what (if anything) actually changes hands, because you and the company are connected persons.

Phasing helps in two specific ways. First, you use the £3,000 annual exempt amount in each tax year you transfer, instead of once. Second, by spreading disposals you can keep more of each year's gain inside the basic-rate band at 18% rather than pushing it into the 24% band. Neither removes the charge; they shave it.

Worked example: spreading the disposals

Take a landlord with three buy-to-let properties, each carrying a £15,000 latent gain, who is a higher-rate taxpayer. Move all three in one tax year and the position is roughly:

• Total gains: £45,000, less one £3,000 annual exempt amount = £42,000 taxable.
• CGT at 24%: around £10,080, all due by the 31 January after the tax year of disposal.

Now move one property per tax year over three years instead:

• Each year: £15,000 gain, less £3,000 exempt amount = £12,000 taxable.
• CGT at 24% each year: around £2,880, so about £8,640 across the three years.

Phasing here defers and reduces the CGT by using the annual exemption three times. The figures move with each landlord's other income and the exact gains, so treat this as the shape of the saving rather than a promise. Note too that residential property gains are reported and paid within 60 days of completion where tax is due, so each transfer brings its own near-term payment, not a single distant bill. The detailed mechanics sit in our guide to the CGT calculation on transferring property to a limited company.

SDLT, LBTT and LTT on each move

Stamp Duty Land Tax is the cost phasing cannot soften. Your company is treated as buying each property at market value, and as a company acquiring residential property it pays the 5% additional-dwellings surcharge on top of the standard bands. That surcharge rose from 3% to 5% for transactions on or after 31 October 2024, so any older guidance quoting 3% is out of date.

Unlike CGT, SDLT is due on completion of each transfer and cannot be spread or deferred. Every property you move generates its own SDLT charge at the higher company rate. For higher-value properties this is often the largest single cost of the whole exercise, and it falls due in full each time you move a property rather than being smoothed across the programme.

The geography matters. SDLT applies in England and Northern Ireland. In Scotland the equivalent is Land and Buildings Transaction Tax with the Additional Dwelling Supplement at 8% (raised from 6% on 5 December 2024). In Wales the equivalent is Land Transaction Tax, which has its own higher-rate residential bands. Use the correct figures for where the property sits; do not apply SDLT rates to a Welsh or Scottish transfer.

One genuine SDLT route exists for the right portfolio. Genuine partnership incorporation under FA 2003 Schedule 15 can reduce the chargeable consideration, sometimes to nil, through the sum-of-lower-proportions rules, but only where a real, pre-existing letting partnership transfers into the company, with partnership tax returns and partnership accounting behind it. It is heavily scrutinised, it is not a quick fix for a husband-and-wife joint holding, and a three-year clawback applies if capital is withdrawn after the transfer. It is also, by its nature, a whole-business move, which sits awkwardly with phasing.

Phased, selective, whole-portfolio or new-only: a comparison

The right structure depends on whether you value cash-flow control, the section 162 deferral, or simply avoiding the transfer altogether. The table sets the four routes side by side.

Feature	Phased transfer	Selective (hybrid)	Whole portfolio at once	Buy new through company
Section 162 relief available	No	No	Yes, if a genuine business	Not applicable (no transfer)
CGT on existing properties	Crystallises on each move	Crystallises on moved ones	Deferred if section 162 applies	None (existing stay personal)
SDLT surcharge on transfer	On each property moved	On each property moved	On the whole portfolio at once	None on a transfer
Annual exempt amount use	Used in each tax year	Used in years you move	Used once	Not relevant
Fixes Section 24 on old property	Gradually, as moved	Only on moved property	Yes, on completion	No
Dual personal-and-company admin	Yes, throughout	Yes, permanently	Brief, then company only	Yes, by design
Best suited to	Cautious landlords spreading cost	Mixed-gain portfolios	Geared higher-rate portfolios that qualify	Landlords still expanding

For the deeper case-by-case analysis of the corporate-versus-personal question after the rate changes, see our guide to the 2027 tax rates and the incorporation decision.

How the 2027 property rates change the calculation

From 6 April 2027 property income is taxed at its own rates, separate from earnings and savings: 22% basic, 42% higher and 47% additional, enacted by Finance Act 2026 (sections 6 to 7 and Schedule 1, Royal Assent 18 March 2026). These apply to landlords in England, Wales and Northern Ireland; only Scottish taxpayers are outside the new structure, because Scottish property income follows Holyrood-set rates.

Two points correct the common misreadings. First, the Section 24 finance-cost credit rises to 22% in step with the new basic rate, so for a basic-rate landlord the rate and the credit still match and no new wedge opens. Second, the rates apply in Wales as well as England and Northern Ireland; Wales does not set its own property rates for 2027/28. The wedge that already squeezes higher and additional-rate landlords (interest relieved at the basic rate while rent is taxed at the marginal rate) is unchanged in width, not widened.

A company sidesteps Section 24 entirely. It deducts mortgage interest in full before corporation tax and pays 19% on profits up to £50,000, 25% above £250,000, and a 26.5% marginal rate in between. So the 2027 rates widen the personal-versus-corporate gap on rental profit for geared higher-rate landlords, which strengthens the case for moving those properties first in a phased plan. They do little for a basic-rate landlord who needs to draw the rent to live on, where extraction costs can wipe out the corporate-rate advantage. For the income-tax side of this, see our guide to finance costs and Section 24 and how to claim mortgage interest relief under Section 24.

The director's loan account: the genuine cash-flow win

One feature of company ownership is too often left out of phased-transfer planning. When you transfer a property to your company, the value the company owes you can be credited to your director's loan account rather than paid out. You can later draw that credit balance back tax-free, because repaying a loan is not income. On a phased programme, each property you move adds to the balance, building a pool you can draw on as you go.

The discipline is to model the balance against the rent you actually intend to draw. A founder taking monthly rent receipts as loan repayments can exhaust the credit faster than expected and then be forced into dividends, taxed at 10.75% basic, 35.75% higher and 39.35% additional above the £500 dividend allowance, earlier than the plan assumed. Beware too the overdrawn position: if the director's loan goes into debit, a section 455 charge of 35.75% applies on amounts unpaid nine months after the year-end (the rate tracks the dividend upper rate). Our guides to director's loan account mechanics and the director's loan repayment strategy set out the extraction order in detail.

Mortgages: usually the real bottleneck

The practical brake on a phased transfer is rarely the tax. It is the lending. Many buy-to-let lenders will not permit a transfer of the mortgaged property into a company at all; they require the existing loan to be redeemed and a fresh application made in the company's name, often at company buy-to-let rates with a personal guarantee. That turns a "transfer" into a remortgage.

This is why the order of properties in a phased plan should follow mortgage maturities, not a neat calendar. Moving a property mid-term can trigger early-redemption charges that dwarf the tax saving from spreading the gain. Where you can, time each transfer to a mortgage's natural end. It is also worth identifying, before you move anything, which lenders in your portfolio are company-friendly, so the order of transfers works with the lending rather than against it.

Running both sides during the transition

While the portfolio is split between personal and company ownership, you are effectively running two property businesses. Personal properties report under self assessment (and, where qualifying income crosses the thresholds, under Making Tax Digital for Income Tax, which is live from 6 April 2026 at £50,000, 6 April 2027 at £30,000 and 6 April 2028 at £20,000). The company reports under corporation tax, files its own accounts at Companies House, and is outside MTD for Income Tax.

That means separate bank accounts, separate records, two sets of deadlines and careful allocation of any shared costs. Landlords routinely underestimate this overhead and let the two sides blur, which is precisely the kind of error HMRC picks up on connected-party transactions. The administrative load is heaviest in the middle of a phased programme, when the portfolio is most evenly split.

Bringing it together

Phasing is a control tool, not a tax shelter. It spreads the capital gains tax across tax years and lets you use the £3,000 annual exempt amount more than once, but it forfeits section 162 relief, so a gain crystallises on every move and the SDLT surcharge falls in full each time. If your lettings genuinely amount to a business and you want the gain deferred, whole-portfolio incorporation under section 162 is the route, not phasing. If you simply want to build the corporate side without a tax event, buying new properties through the company is cleaner than transferring old ones.

The sensible sequence is to value the latent gain and yield on every property, decide which route fits, confirm lender appetite before moving anything, and then sequence the transfers around mortgage maturities and the £3,000 allowance. Phasing earns its place for the cautious landlord who wants to test company ownership and smooth the cash flow, with eyes open about the section 162 cost. For the wider corporate-versus-personal comparison, our complete guide to buy-to-let limited companies and complete guide to capital gains tax on property are the natural next reads.