Incorporating does not fix Section 24. It removes the finance cost restriction and replaces it with a capital gains disposal at market value, an SDLT charge on market value, and a second layer of tax every time you take money out. This guide works through when that is worth it and when it is not.
Guide · Updated September 2026
You do not move properties into a company. You sell them to it. That single sentence explains almost every cost on this page.
A transfer to a company you control is a disposal to a connected person at market value under sections 17 and 18 of TCGA 1992, whatever price is put on the paperwork and whatever money actually changes hands. For stamp duty land tax, section 53 of the Finance Act 2003 does the same thing: a transfer to a connected company is charged on market value, not on the consideration. So the day you incorporate you have a capital gains tax event and an SDLT event, both measured on what the portfolio is worth rather than on what you paid for it.
What you get in return is that the company is outside Section 24. HMRC's Property Income Manual at PIM2054 states that companies carrying on property business are not affected, so mortgage interest is fully deductible against company profits. That is a real advantage for a geared portfolio. It is not free, and this guide is about the price.
Section 162 TCGA 1992 can defer the capital gain, but only where three conditions are met. The business must be transferred as a going concern, with all its assets (cash may be excluded), in exchange wholly or partly for shares in the company. The gain is not forgiven — it is deferred by reducing the base cost of the shares you receive, so it returns when you sell them. Where the consideration is only partly in shares, only a proportion of the gain is deferred.
Incorporation relief used to be automatic. For transfers of a business on or after 6 April 2026, a claim must be made in the transferor's Self Assessment return for the year of transfer, giving brief details of the transaction, the tax computations and the type of business transferred. Section 162A TCGA 1992 — the old election out — is repealed. The legislation is section 39 of the Finance Act 2026. An incorporation done without that claim on the return no longer relieves itself quietly in the background.
Section 162 relieves the transfer of a business. "Business" is not defined in TCGA 1992, so it takes its ordinary meaning, and it is wider than "trade" — but it is not automatic, and a portfolio is not a business simply because it is large.
HMRC follows Ramsay v HMRC in the Upper Tribunal. Judge Berner's formulation is the one that matters: it is the degree of activity as a whole which is material to the question whether there is a business, and not the extent of that activity when compared to the number of properties or lettings. Twenty flats run by an agent can fail where five run personally succeed.
HMRC's stated working indicator is that incorporation relief will be available where an individual spends 20 hours or more a week personally undertaking the sort of activities that are indicative of a business. A portfolio managed entirely by a letting agent, with the owner doing little beyond reading statements, will struggle on that test — and if section 162 is not available the whole latent gain crystallises immediately at 18% or 24%.
A landlord owns a flat bought for £180,000, now worth £420,000. Ignoring incidental costs, the latent gain is £240,000.
With no section 162 relief and the £3,000 annual exempt amount, the chargeable gain is £237,000. At 24% that is £56,880 of capital gains tax, payable whether or not a single pound has come out of the transaction — and reportable within 60 days of completion. Figures are illustrative.
The company pays SDLT on the market value of what it acquires. Since it is a company acquiring residential property, the higher rates apply to anything worth £40,000 or more — that is the 5 percentage point additional dwellings surcharge, in force for transactions with an effective date on or after 31 October 2024. And a single dwelling worth more than £500,000 attracts the 17% flat rate for non-natural persons unless a relief applies. The stamp duty guide sets out the full rate tables and the reliefs.
Transferring a flat worth £300,000 to your own company: the higher rates give 5% on the first £125,000 (£6,250), 7% on the next £125,000 (£8,750) and 10% on the remaining £50,000 (£5,000) — £20,000 of SDLT. Under £500,000, so the 17% flat rate does not arise.
Transferring a house worth £700,000: the 17% flat rate on the whole consideration would be £119,000. Where property rental business relief applies, the ordinary higher rates give £6,250 + £8,750 + 10% of £450,000 (£45,000) = £60,000. The relief is worth £59,000 on that one property — and it is subject to clawback. Figures are illustrative.
Partnership relief is the route people reach for, and it needs stating carefully. Under paragraph 18 of Schedule 15 to the Finance Act 2003, where a chargeable interest passes from a partnership to a partner or a person connected with a partner, the chargeable consideration is market value less the sum of the lower proportions determined under paragraph 20. That sum is worked out owner by owner: identify the connected partners, take for each the lesser of their apportioned share of the post-transfer interest and their pre-transfer partnership share, and add the results. Where the partners take shares in the company in the same proportions as their partnership shares, the sum of the lower proportions approaches the whole and the chargeable consideration approaches nil.
Two warnings belong with that, and neither is decorative:
Corporation tax has run at 25% above £250,000 of profit and 19% at or below £50,000 since 1 April 2023, with marginal relief between the two. The catch for landlords is that both limits are divided by the number of associated companies, counting the company itself, and pro-rated for short accounting periods.
A landlord runs four property SPVs and a holding company: five associated companies. The £50,000 lower limit becomes £10,000 each and the £250,000 upper limit becomes £50,000 each. An SPV making £60,000 of profit is above its own upper limit and pays the full 25%, where a single company with the same profit would have been in marginal relief. Figures are illustrative.
Then there is getting the money out. Dividend rates rose on 6 April 2026 to 10.75% at the ordinary rate and 35.75% at the upper rate; the additional rate is unchanged at 39.35%.
A company makes £40,000 of property profit and the shareholder wants all of it. Corporation tax at 19% is £7,600, leaving £32,400 to distribute. At the upper dividend rate of 35.75% that is £11,583. Total tax £19,183, which is 48.0% of the original profit, against 40% for a higher-rate individual on the same figure.
Leave the £40,000 in the company and the tax stops at £7,600. That gap is the whole case for incorporating, and it only exists if the money genuinely stays put. The figures ignore the dividend allowance and assume the dividend falls wholly in the upper rate band. Figures are illustrative.
ATED is the charge landlords forget. It is payable mainly by companies owning UK residential property valued over £500,000, and for 1 April 2026 to 31 March 2027 the chargeable amounts run from £4,600 for £500,000 to £1m, through £9,450 for £1–2m and £32,200 for £2–5m, up to £303,450 above £20m. A company also has no capital gains annual exempt amount, so the £3,000 an individual gets each year disappears on incorporation.
It helps where profits are retained and reinvested rather than drawn; where the portfolio is geared enough that full interest deductibility outweighs the second layer of tax on extraction; where the activity is genuinely a business on the Ramsay test so section 162 relief is available; and where either a genuine partnership exists so paragraph 18 relief is in point, or the SDLT bill is small against the ongoing saving.
It does not help where you need the income personally, because corporation tax at 19% to 25% plus dividend tax at up to 35.75% is worse than income tax for most people; where the portfolio is unencumbered or lightly geared, so there was never much interest to shelter and Section 24 was not really the problem; where there is a large latent gain and no "business", so the whole gain crystallises on day one; or where SDLT on market value cannot be relieved.
Four costs are underweighted almost every time: refinancing the whole portfolio, the higher rates generally charged on commercial and limited company mortgages, ATED, and the loss of the CGT annual exempt amount inside a company.
One thing genuinely does move the argument. From 6 April 2027 property income has its own rates of 22%, 42% and 47% for individuals in England, Wales and Northern Ireland. Companies are not mentioned in that measure — it addresses individuals, partnerships, trusts and estates. For a landlord who retains profits, the gap between corporation tax and personal property tax rates widens from that date. For a landlord who draws everything, the April 2026 dividend rise pulls the other way.
We model the whole thing on your own numbers: the latent gain, whether the business test is realistically met, SDLT on market value with and without any partnership analysis, and the ongoing position both retained and extracted, including the April 2027 rates, and we tell you whether incorporating would cost more than it saves. See the incorporation service and property company accounts, or get a fixed-fee quote. This is information about the tax, not a recommendation about your property or your borrowing.
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It removes the finance cost restriction, because HMRC's manual PIM2054 confirms companies carrying on property business are not affected and a company deducts its mortgage interest in full. But it does not do so for free, and calling it a fix is misleading. Transferring properties to a company you control is a disposal at market value for capital gains tax under sections 17 and 18 TCGA 1992, and an SDLT charge on market value under section 53 FA 2003. After that, profits taken out carry a second layer of tax at dividend rates that rose to 10.75% and 35.75% on 6 April 2026. It works for retained profits on a geared portfolio and rarely otherwise.
Unless incorporation relief applies, yes, and on the full market value gain rather than on anything you receive. A transfer to a company you control is a disposal to a connected person at market value under sections 17 and 18 TCGA 1992, whatever the paperwork says. Section 162 TCGA 1992 can defer the gain where a business is transferred as a going concern with all its assets, wholly or partly in exchange for shares, but it reduces the base cost of those shares rather than cancelling the gain. For transfers on or after 6 April 2026 the relief must be claimed in your Self Assessment return for the year of transfer, and section 162A is repealed.
Normally yes, and on market value rather than on what changes hands, because section 53 of the Finance Act 2003 charges a transfer to a connected company on market value. The company pays the higher rates for additional dwellings on anything worth £40,000 or more, which have carried a 5 percentage point surcharge since 31 October 2024, and a single dwelling worth more than £500,000 attracts the 17% flat rate for non-natural persons unless a relief such as property rental business relief applies. Partnership relief under paragraph 18 of Schedule 15 can reduce the chargeable consideration, but it is subject to the paragraph 24 anti-avoidance provision and needs a genuine partnership to exist first.
Business is not defined in TCGA 1992, so it takes its ordinary meaning and is wider than trade, but simply owning properties is not enough. HMRC follows Ramsay v HMRC in the Upper Tribunal, where Judge Berner held that it is the degree of activity as a whole which is material to whether there is a business, not the extent of that activity compared with the number of properties or lettings. HMRC's stated working indicator is that relief will be available where an individual spends 20 hours or more a week personally undertaking activities indicative of a business. A portfolio run entirely by a letting agent will struggle, and failing the test means the whole latent gain crystallises at once.
They divide the rate thresholds, which is why landlords with several SPVs often pay far more than they expect. Since 1 April 2023 the main rate has been 25% on profits above £250,000, the small profits rate 19% at or below £50,000, and marginal relief applies between them. Both limits are divided by the number of associated companies, counting the company itself, and pro-rated for short accounting periods. With four SPVs and a holding company, that is five companies, so the lower limit becomes £10,000 each and the upper limit £50,000 each. An SPV making £60,000 of profit then pays the full 25% rather than sitting in marginal relief.
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