Incorporation Relief for Buy-to-Let: Should You Move Properties to a Ltd Company?

Incorporation relief buy-to-let ltd company: why landlords consider it

The primary driver is Section 24 of the Finance Act 2015. Since 6 April 2020, individual landlords can no longer deduct mortgage interest as a property expense — instead they receive a 20% basic-rate tax credit. Higher-rate taxpayers bear the greatest impact: effectively paying 40% Income Tax on profit that mortgage interest used to shelter, then receiving only a 20% credit back. Our detailed guide to Section 24 mortgage interest covers the worked examples.

Limited companies are not subject to Section 24. Mortgage interest is fully deductible as a business expense within a company, reducing Corporation Tax profit before tax is calculated. With Corporation Tax at 25% for profits above £50,000 (as at April 2026) versus Income Tax at up to 45% for additional-rate individual taxpayers, the arithmetic can favour the company structure — provided the upfront costs of getting there can be justified.

The problem is that transferring personally owned properties into a company triggers two substantial tax charges — CGT and SDLT — and requires mortgage refinancing. Incorporation relief under TCGA 1992 s162 is the mechanism that can defer the CGT charge, but its availability for buy-to-let landlords is far from guaranteed.

TCGA 1992 s162: how incorporation relief works

Section 162 of the Taxation of Chargeable Gains Act 1992 provides that where a person transfers a business as a going concern to a company, wholly or partly in exchange for shares in the company, any chargeable gain that would otherwise arise on the transfer is rolled over into the base cost of the shares.

In practical terms, if you transfer a property worth £500,000 that you originally purchased for £200,000 into a company in exchange for shares, the £300,000 gain does not trigger an immediate CGT liability. Instead, the base cost of your shares is reduced by the deferred gain — so when you eventually sell the shares, the gain crystallises at that point rather than now.

The conditions for s162 relief to apply are:

• The assets transferred must constitute a business — not merely an investment.
• The business must be transferred as a going concern.
• The transfer must be wholly or partly in exchange for shares (not purely cash).
• All assets of the business must be transferred (with limited exceptions).

The relief is automatic where the conditions are met — there is no claim required. However, the deferred gain is embedded in the company shares and will eventually be taxable. If the company later sells a property, the company pays Corporation Tax on any gain; if you sell your shares, you pay CGT on the share gain.

The central problem: does a buy-to-let portfolio qualify as a “business”?

HMRC's longstanding position is that a passive buy-to-let portfolio — where the landlord collects rent and manages maintenance but does not provide hotel-style services — does not constitute a “business” for the purposes of s162. HMRC regards it as the management of an investment rather than the conduct of a trade or business.

This position has been tested in the tribunals. The key cases include Elizabeth Moyne Ramsay v HMRC [2013] UKFTT 176 (TC) and later decisions, which have generally gone against landlords seeking to apply s162 to standard buy-to-let portfolios. The courts apply a multi-factor test looking at the degree of activity, the nature of services provided to tenants, the scale of the operation, and whether the taxpayer holds the property as an investment or as a vehicle for commercial activity.

Landlords with a stronger argument include those operating:

• Houses in multiple occupation (HMOs) where active management is substantial — tenant selection, communal area maintenance, utility management, and high tenant turnover all support a “business” characterisation.
• Serviced accommodation or short-term lets where the landlord provides hotel-style services such as cleaning, linen change, and key management.
• Large portfolios with employed staff and a dedicated management structure (rather than self-management alongside other employment).

Even in these cases, HMRC may challenge the s162 claim. The consequence of a failed claim is the full CGT charge on the transfer at the date of incorporation — potentially a very large liability. Any landlord considering incorporation relief must obtain written advice from a chartered tax adviser before proceeding.

SDLT: the cost that incorporation relief does not solve

Even where s162 CGT deferral is available, it does not affect SDLT. Transferring residential property from an individual to a company is treated as a sale at market value for SDLT purposes. SDLT is charged at the standard residential rates plus the 5% additional dwellings surcharge (increased from 3% in the October 2024 Autumn Budget) that applies to companies purchasing residential property.

The SDLT cost on a portfolio of four properties is illustrated below using illustrative values:

These figures are illustrative. The SDLT cost on a four-property portfolio with an average value of £350,000 per property would be in the region of £100,000–£120,000. This is a cash cost that must be paid from the company's resources (often funded by a director's loan from personal funds) and must be recovered from Corporation Tax savings before the incorporation is financially advantageous.

Note that Multiple Dwellings Relief (MDR), which previously reduced the SDLT burden on portfolio transfers, was abolished from 1 June 2024. This significantly increased the SDLT cost of incorporating a property portfolio. Our detailed guide to stamp duty for landlords in 2026 covers current SDLT rates and the abolition of MDR.

The mortgage refinancing trap

The third major cost of buy-to-let incorporation is mortgage refinancing. The vast majority of personal buy-to-let mortgages include a clause preventing transfer of the mortgage to a different borrower — including a company. The company cannot simply take over the existing mortgage; the personal mortgage must be redeemed and a new company buy-to-let mortgage arranged.

This creates several problems:

• Early redemption charges (ERCs). If existing mortgages are on fixed rates, ERCs typically range from 1% to 5% of the outstanding balance. On a £200,000 mortgage, a 3% ERC costs £6,000.
• Higher company mortgage rates. Company buy-to-let mortgages are priced at a premium to personal mortgages — typically 0.5% to 1.0% higher. On £800,000 of borrowing across four properties, an extra 0.75% costs £6,000 per year in additional interest.
• Arrangement fees. New company mortgages carry arrangement fees, valuations, and legal costs per property. Budget £2,000–3,500 per property in transaction costs.
• Lender criteria. Company buy-to-let mortgages have stricter criteria than personal mortgages. Some lenders require the company to have been trading for a minimum period or require personal guarantees from directors.

The optimal timing for incorporation is therefore when existing fixed-rate mortgages are approaching their end date — minimising ERCs — and when the portfolio is refinanced at the point of incorporation. This requires careful planning, often 12–24 months in advance.

When does incorporation make financial sense?

Independent analysis by property tax specialists generally identifies the following profile as the minimum threshold at which incorporation can make financial sense:

• Four or more properties — fewer properties mean the SDLT and refinancing costs take too long to recoup from Corporation Tax savings.
• Higher or additional-rate taxpayer — the Section 24 impact is greatest for landlords in the 40% or 45% bands; basic-rate taxpayers have far less to gain.
• Low existing mortgage balances — lower outstanding balances mean lower ERCs and lower refinancing costs.
• Long-term holding intention — the payback period on upfront costs is typically 7–15 years; landlords planning to sell within 5 years rarely recoup the incorporation costs.
• Properties available for s162 business argument — HMOs or actively managed portfolios where the business characterisation is supportable.

These are general indicators, not a formula. Every landlord's situation is different. A full financial model — incorporating current CGT exposure, projected SDLT, refinancing costs, annual Corporation Tax savings, and projected payback period — is essential before making any decision.

MTD implications for incorporated landlords

MTD for Income Tax applies to individuals, not companies. If you incorporate your portfolio, you move from the MTD for Income Tax regime (quarterly updates, SA105 categorisation) to Corporation Tax filing — a completely different compliance regime with its own deadlines and software requirements.

Landlords who remain personally owned and above the £50,000 threshold face MTD from 6 April 2026. Use our MTD readiness checker to confirm your current obligations, and read our MTD for landlords guide for a full overview of the quarterly submission process.

Frequently asked questions