Property incorporation.

The main reason is the finance cost restriction. Individual residential landlords cannot deduct mortgage interest from rent. They receive a 20% tax credit instead (22% from 6 April 2027), while rental profit is taxed at up to 45% (47% from 6 April 2027). A higher rate taxpayer with large borrowing can pay tax on profit spent on interest.

A buy to let limited company generally deducts finance costs as an expense and pays corporation tax at 19% on profits up to £50,000, 25% above £250,000 and a tapered rate between. These limits are shared if you own other companies. Profits kept to repay debt or buy more property are taxed only at those rates. The catch is the cost of getting the properties in, and the tax on money taken out.

Transferring property to a company you control is treated as a disposal at market value, even if the company pays nothing. Capital gains tax is due on the growth at 18% or 24% after the £3,000 annual exempt amount, reported and paid within 60 days of completion.

Stamp duty land tax is also charged on market value where you are connected with the company. Property in Wales or Scotland has its own tax and rules. Companies pay the higher rates on residential property, and dwellings over £500,000 can face a 17% rate unless a relief such as the one for property rental businesses applies.

Existing mortgages generally cannot simply move to a company. Expect early repayment charges, new fees and different lending terms.

The capital gains tax can be deferred using incorporation relief (section 162, Taxation of Chargeable Gains Act 1992). The gain is rolled into the base cost of your new shares.

A business must be transferred as a going concern, with all its assets other than cash, wholly or partly for shares issued by the company. Where some consideration is not shares, such as a credit to a loan account, the relief is reduced in proportion.

The hardest test is the word business. Holding property as an investment is not enough. In the Ramsay case the Upper Tribunal looked at the overall level of personal activity in running the lettings, not the number of properties. HMRC's manual says it should accept a business where an individual personally spends 20 hours or more a week on that work, and looks closely at anything less.

For transfers on or after 6 April 2026 the relief no longer applies automatically. It must be claimed, with the details HMRC asks for, by the first anniversary of the 31 January after the tax year of transfer, usually on the tax return. If any capital gains tax is still payable on residential property after the relief, for example because part of the price is credited to a loan account, it must be reported and paid within 60 days.

Special SDLT rules apply when land passes from a partnership to a company connected with the partners. Broadly, the charge is based on the share of the property not already owned, through the partners, by people connected with the company. Where they apply, SDLT can be much lower than on a straight market value transfer.

Care is essential. The rules need a genuine partnership carrying on a business, which is not the same as jointly owning a rental property. A partnership formed shortly before incorporation mainly to save stamp duty is open to challenge, including under the anti-avoidance rule in section 75A of the Finance Act 2003. HMRC has also warned against landlord schemes using LLPs and hybrid partnerships. We rely on partnership treatment only where the facts support it, and check the current rules at the time.

Company profit belongs to the company. To spend it you take dividends, salary or repayments of money you have lent the company. For 2026/27, dividends above the £500 allowance are taxed at 10.75%, 35.75% or 39.35%. If you need most of the profit to live on, corporation tax plus dividend tax can exceed what you pay now. Loan account repayments are not taxed as income, but non-share consideration reduces incorporation relief. See our profit extraction advice.

If a company holds a dwelling worth over £500,000, ATED applies. Rental businesses can usually claim relief, but a relief declaration return is still due by 30 April each year.

Incorporation is often wrong for basic rate taxpayers, landlords with low borrowing, or anyone who needs most of the income personally. It rarely suits a landlord planning to sell within a few years, as gains are taxed in the company and again on extraction. If the letting is not a business, the capital gains tax on transfer may be payable in full. Business property relief is not generally available for letting, so a company is not an inheritance tax exemption in itself.

Sometimes the better answer is to keep existing properties personally and buy new ones in a company. Our property tax page sets out the personal rules we compare against.