Should you incorporate your buy-to-let portfolio?
Transferring rental property into a limited company can save significant tax, but it triggers Capital Gains Tax and Stamp Duty on the same day.
When incorporation makes sense
You're a higher-rate taxpayer
Section 24 hits hardest at 40% and 45%. If your rental profit (after expenses but before mortgage interest) pushes you into higher-rate territory, incorporation can reduce your effective tax rate significantly.
You have significant mortgage interest
The more mortgage interest you pay, the bigger the Section 24 impact. If mortgage interest represents 40%+ of your rental income, incorporation may be worth the upfront cost.
You're holding long-term
Incorporation has high upfront costs (CGT + SDLT). If you plan to hold the properties for 10+ years, you have time to recover those costs through annual tax savings. Short-term holds rarely justify incorporation.
You're building a portfolio
If you're acquiring new properties, buying them in a limited company from the start avoids the CGT/SDLT hit on transfer. Existing properties can stay personal, new ones go into the company.
When it doesn't make sense
Low mortgage levels
If you own properties outright or have small mortgages, Section 24 doesn't hurt much. The upfront cost of incorporation (CGT + SDLT) may never be recovered.
Planning to sell soon
If you're selling within 5 years, the upfront incorporation costs likely exceed any tax savings. Better to stay personal and pay the Section 24 tax.
You're a basic-rate taxpayer
Section 24 has minimal impact at 20%. Corporation tax (19%) + dividend tax may not save you much, and the upfront costs are the same regardless of tax bracket.
You need to extract all profit
If you rely on rental income to live, extracting profit as dividends triggers personal tax. The company structure only saves tax if you can leave profit in the company.
Calculate your incorporation costs
Get a quick estimate of upfront costs (CGT + SDLT) and break-even timeline.
Incorporation Cost Calculator
Calculate the upfront cost (CGT + SDLT) and break-even timeline for incorporating your rental property.
Simplified estimate. Actual costs depend on your specific circumstances and require full feasibility analysis.
Stamp duty when you incorporate
Stamp duty is the cost landlords underestimate most. When you move a property from your own name into your limited company, no money needs to change hands for SDLT to be due. You and the company are connected persons, so the transfer is deemed to take place at market value and SDLT is charged on that figure. A property you bought for £180,000 and now worth £310,000 is taxed on £310,000, whatever the paperwork says the consideration was.
On top of that, a company buying a residential dwelling pays the 5% additional-dwelling surcharge, and for a company there is no first-property exemption from it. The surcharge rose from 3% to 5% on 31 October 2024 and the residential nil-rate band returned to £125,000 on 1 April 2025, so the effective rate on a mid-sized portfolio transfer is a good deal higher than most landlords remember. Run the numbers on the stamp duty calculator property by property, then use the incorporation cost calculator to set the total against the annual saving.
Multiple Dwellings Relief used to soften portfolio transfers, but it was abolished for transactions completing on or after 1 June 2024, so it is no longer available to plan around. What survives is the six-dwellings rule: where six or more separate dwellings are acquired in a single transaction, or in linked transactions, the purchase can be treated as non-residential for SDLT, which brings in the non-residential rates and removes the surcharge. That is genuinely useful for a landlord moving a large portfolio in one go, and irrelevant to anyone transferring two or three properties.
The other route out is partnership relief under Schedule 15 FA 2003, which can reduce the SDLT charge to nil where a genuine partnership incorporates. The relief depends on the partners in the old partnership and the shareholders in the new company being effectively the same people in the same proportions, and on there being a real partnership in the first place: a partnership agreement, a partnership tax return, joint working and shared control of the business, not simply a property held in joint names. HMRC looks closely at partnerships formed shortly before an incorporation, and anti-avoidance rules can claw the relief back if shares are shuffled afterwards.
Scotland and Wales have their own regimes and their own arithmetic. Scotland charges LBTT plus the 8% Additional Dwelling Supplement, which is levied on the entire purchase price rather than a slice, so incorporating a Scottish portfolio is usually the most expensive version of this exercise. Wales charges Land Transaction Tax, and additional properties there sit on a separate higher-rates table running from 5% up to 17% rather than main rates with a surcharge bolted on. The connected-party market-value rule applies across all three, so the transfer is valued the same way wherever the property sits.
Connected-party and clearance points
The Capital Gains Tax side turns on Section 162 TCGA 1992, incorporation relief. Where it applies, the gain on the properties is not taxed on transfer. Instead it is rolled into the base cost of the shares you receive, so the tax is deferred until you dispose of those shares. The relief is automatic, which means you do not claim it, but it also means you cannot rely on HMRC agreeing in advance that the conditions were met.
Three conditions have to hold. You must transfer a business as a going concern. You must transfer all of the assets of that business other than cash. And the transfer must be wholly or partly in exchange for shares issued by the company, with only the share element qualifying for relief, so taking a director loan account out of the transfer reduces the relief proportionately.
The first condition is where most landlord claims fail. Holding property and collecting rent is an investment activity, not a business, unless the scale and nature of what you do takes it further. The case advisers work from is Ramsay v HMRC, where roughly 20 hours a week of hands-on management across a property of 10 flats was accepted as a business. Repairs organised personally, tenant management, viewings, maintenance, accounts and dealing with the building day to day all counted. A portfolio run entirely through a letting agent, with a few hours a month of oversight, generally does not, however large it is. The evidence needs to exist before the transfer, not be reconstructed afterwards.
Connected-party rules run alongside all of this. Because you control the company, market value is substituted for whatever price you set, for CGT as well as SDLT, so undervaluing the transfer achieves nothing except a valuation argument later. Get a defensible valuation at the point of transfer and keep it. The same connection is why the mortgage position matters: lenders will normally require the personal borrowing to be redeemed and replaced with company buy-to-let lending, which carries its own arrangement fees and early repayment charges.
There is no statutory clearance for Section 162. You can ask HMRC for a non-statutory clearance on the facts, but it is not binding in the way a statutory clearance is, and HMRC will often decline to give a view on whether an activity amounts to a business. The practical answer is a documented analysis of your own facts prepared before you transfer anything. Where the CGT and SDLT at stake run into five or six figures, that analysis is worth paying for: our property tax advice work covers exactly this ground, and our property accountant service picks up the company filings afterwards. If you are still weighing whether the structure is right at all, the landlord tax position in your own name is the right place to start.
Our incorporation process
Initial feasibility call
We discuss your portfolio, income, tax position, and plans. This is a short conversation to understand whether incorporation is even worth modelling.
Full financial modelling
We calculate upfront costs (CGT + SDLT), annual tax savings, break-even timeline, and cash flow impact. You get a written report with clear recommendations.
Decision and implementation
If you decide to proceed, we coordinate with your solicitor, set up the company, handle the property transfer, and ensure all filings are correct. If you decide not to proceed, that's fine. You have the analysis for future reference.
What you get
- ✓Full CGT and SDLT cost calculation based on your actual property values and purchase prices
- ✓Annual tax saving comparison: personal vs. company structure
- ✓Break-even timeline showing when you recover the upfront costs
- ✓Clear recommendation: incorporate now, wait, or don't incorporate at all
- ✓Written report you can share with your solicitor or mortgage broker
Incorporation questions landlords ask
Do you pay stamp duty when transferring property to your own limited company?
Yes, in almost every case. The transfer is treated as taking place at market value even if no money changes hands, because you and the company are connected. SDLT is charged on that market value, and because a company is buying a residential dwelling the 5% additional-dwelling surcharge applies from the first pound. The only common escape is partnership relief, which requires a genuine partnership rather than a jointly owned portfolio.
What is Section 162 incorporation relief and do I qualify?
Section 162 TCGA 1992 rolls your Capital Gains Tax charge into the base cost of the shares you receive, so no CGT is payable on the transfer itself. It applies automatically where you transfer a business as a going concern, with all of its assets other than cash, wholly or partly in exchange for shares. The difficulty for landlords is the word business. Simply owning let property is an investment, not a business, unless the activity is substantial enough to count.
How many hours a week do I need to spend for my portfolio to count as a business?
There is no statutory hours test. The benchmark most advisers work to comes from Ramsay v HMRC, where around 20 hours a week of genuine active management across a 10-flat property was enough to make it a business. Fewer hours, or a portfolio run entirely by a letting agent, makes the case much weaker. What matters is the degree and quality of the activity, evidenced contemporaneously, not a number on its own.
Can I get advance clearance from HMRC that Section 162 applies?
No. There is no statutory clearance procedure for Section 162 incorporation relief. You can apply for a non-statutory clearance setting out the facts and asking HMRC for its view, but that is not binding in the way a statutory clearance would be, and HMRC often declines to comment on whether an activity amounts to a business. In practice you rely on a documented analysis of your own facts, which is why the evidence you keep before the transfer matters.
Does incorporation stamp duty work differently in Scotland and Wales?
Yes. Scotland charges LBTT plus the 8% Additional Dwelling Supplement, which applies to the whole price rather than a slice, so the cost of transferring a Scottish portfolio into a company is usually higher than the English equivalent. Wales charges Land Transaction Tax under a separate higher-rates table for additional properties, running from 5% up to 17%, rather than main rates plus a surcharge. The market-value and connected-party rules apply in all three regimes.
Get your incorporation feasibility analysis
Book a free consultation. We'll discuss your portfolio and give you a clear recommendation.