Transferring rental property into a company you control is treated as a sale at market value, for both capital gains tax and stamp duty land tax. Incorporation relief can defer the capital gains tax, but only if your letting is a genuine business and you transfer all of it in exchange for shares, and for transfers from 6 April 2026 you must now claim it. Stamp duty is often what decides it.
Why the transfer counts as a sale
A company you control is "connected" with you. For capital gains tax, a disposal to a connected person is treated as not being at arm's length, so the gain is worked out using the market value of each property, whatever price is actually paid.
Stamp duty land tax has a similar rule: where the buyer is a company connected with the seller, the chargeable consideration cannot be less than market value. So a landlord with a long-held portfolio can face two tax bills on a transaction where no cash changes hands. Residential gains are taxed at 18% or 24% in 2026/27, and where tax is due on UK residential property it must normally be reported and paid within 60 days of completion.
Stamp duty land tax covers England and Northern Ireland. Scotland and Wales have their own taxes.
Incorporation relief: the conditions
Section 162 TCGA 1992 lets an individual (or the partners in a partnership) roll the gain into the shares they receive, rather than paying it now. HMRC's manual sets out three conditions:
- a business is transferred, and it is transferred as a going concern;
- all of the assets of that business go to the company, although cash can be kept back;
- the company pays for the business wholly or partly by issuing shares to you.
You cannot leave some properties outside. If part of the price is cash or a credit to a director's loan account, the relief is restricted in proportion and that part of the gain is taxed now.
The relief defers tax rather than removing it. The gain reduces the base cost of your new shares, so it comes back if you later sell or dispose of them.
Is your letting a "business"?
Holding investment property is not automatically a business. In Ramsay v HMRC [2013] UKUT 0226 (TCC), the Upper Tribunal held that Mrs Ramsay's letting activity was a business, looking at the overall degree of activity: a serious, continuous undertaking run on sound business lines.
HMRC's guidance at CG65715 says it will accept the relief where an individual personally spends 20 hours or more a week on activities of that kind. Fewer hours is not fatal, but the evidence matters, and a landlord who hands everything to a letting agent will struggle.
Do not expect HMRC to confirm the point in advance. Its non-statutory clearance guidance says it will not give clearances on matters of fact, and specifically whether certain activities amount to a business. Keep your own records: time logs, tenant correspondence and maintenance work.
The new requirement to claim from 6 April 2026
Until 5 April 2026, incorporation relief applied automatically when the conditions were met, and you could elect out of it under section 162A. Finance Act 2026, section 39, changed this for transfers made on or after 6 April 2026:
- the relief now applies only if you make a claim, with the details HMRC asks for;
- the deadline is the first anniversary of the 31 January after the tax year of transfer, so 31 January 2029 for a transfer in 2026/27;
- the section 162A election has been repealed for new transfers.
HMRC's manual (CG65735) expects the claim to describe the business, the company and the shares issued, with the value of each chargeable asset and the relief calculation. If you do not claim in time, you lose the relief.
Mortgages and the cost of your shares
- Capital gains tax. By concession (ESC D32), HMRC does not treat business liabilities taken over by the company as cash consideration, so they do not restrict the relief. Personal borrowing is different: a mortgage used to release equity for private spending may be treated as a personal liability. Separately, the deferred gain cannot exceed the cost of your shares, which is the value of the business net of its liabilities. In a heavily geared portfolio, part of the gain can become taxable now.
- Stamp duty. A company that takes on your mortgage is treated as paying the amount of debt it assumes. With the connected company rule, market value is usually the floor anyway.
- The lender. Buy-to-let mortgages usually cannot just be moved. Expect to refinance, with fees, valuations and possibly early repayment charges.
Stamp duty: the usual sticking point
Incorporation relief does nothing for stamp duty. On a transfer to your company:
- the company pays on market value, and pays the 5% surcharge that applies to residential property bought by companies;
- a 17% flat rate can apply to a dwelling worth over £500,000 bought by a company, although relief is available where it is used in a property rental business;
- multiple dwellings relief was abolished for transactions completing from 1 June 2024, but where six or more dwellings are transferred in a single transaction, they are treated as non-residential property.
Where property is genuinely held by a partnership, special rules in Schedule 15 to the Finance Act 2003 can reduce the charge when the partnership transfers it to a company connected with the partners, in some cases to nil. HMRC's manual stresses that a partnership exists only if there is a business, and simply owning investment property jointly may not be enough. A partnership created shortly before incorporating to secure this result is the kind of arrangement HMRC challenges, including under the SDLT anti-avoidance rule in section 75A.
| Tax | Starting point | What may reduce it |
|---|---|---|
| Capital gains tax | Gain on each property at market value | Incorporation relief, now by claim, if a business is transferred for shares |
| Stamp duty land tax | Market value, with the 5% company surcharge | Genuine partnership rules; non-residential rates for six or more dwellings in one transaction |
| Annual tax on enveloped dwellings | Charge for dwellings over £500,000 held by a company | Relief for property rental businesses, claimed on a return |
Be wary of marketed schemes
HMRC has issued two warnings about structures sold to landlords: Spotlight 63 (hybrid partnerships) and Spotlight 63a (hybrid partnerships with indemnities, April 2026). Both move properties into an LLP with a corporate member to sidestep the finance cost restriction. HMRC's view is that they do not work, citing the mixed member partnership rules, transfer of income stream rules and the stamp duty partnership provisions. The general anti-abuse rule also covers capital gains tax, stamp duty land tax and the annual tax on enveloped dwellings. Be sceptical of any package promising no upfront tax for a large fee. Our guide to choosing a Tax Advisor or accountant lists the questions to ask.
When incorporating does not make sense
- Small portfolios. Stamp duty, refinancing and fees can outweigh years of savings.
- You need the income. Profits taken out as dividends are taxed again, at 10.75% and 35.75% for basic and higher rate taxpayers in 2026/27.
- You cannot show a business. Without incorporation relief, the gain is taxed at transfer, often with no cash from the transaction to pay it.
- High-value dwellings. Dwellings over £500,000 need annual returns, even where relief means nothing is payable.
- Inheritance tax. Shares in a property letting company will not usually qualify for business relief, so the move rarely helps on that front by itself.
For new purchases, see our guide to buying in a company or personally. See also stamp duty for property investors and the property income tax rates from April 2027.
What to do now
- Get up-to-date market values for each property and work out the gain on each one.
- Record how much time you spend running the portfolio.
- Ask your lender about refinancing into a company.
- Have the stamp duty and capital gains tax costed together, against realistic ongoing savings.
- If you go ahead, diarise the incorporation relief claim and any 60-day return, and keep the valuations and evidence on file.
Our property incorporation service covers the valuations, claims and returns. If you are weighing up incorporating a portfolio, book a consultation and we will cost the options before you commit to anything.
This article is general information about UK tax, based on the law and HMRC practice at the date shown above. It is not advice, and reading it does not make you our client. Tax rules change and their effect depends on your circumstances, so please speak to us before acting on it.