Incorporation is the most over-sold idea in landlord tax. It does remove the finance cost restriction. It also triggers capital gains tax at market value, stamp duty on market value, and a second layer of tax on everything you take out. Here is the whole bill, and the four conditions under which it is still worth paying.
The claim is half true, which is what makes it dangerous. Companies are outside the finance cost restriction: HMRC's Property Income Manual states that companies carrying on a property business are not affected, so mortgage interest is fully deductible. If that were the only fact, the answer would be obvious.
It is not the only fact. Moving a portfolio into a company is a disposal of every property, at market value, to a connected person — plus a purchase by the company, also taxed on market value. Then every pound of profit you eventually need personally is taxed a second time on the way out, at dividend rates that rose on 6 April 2026.
So the honest framing is not "does it fix Section 24" but "is the entry cost recovered, and over how many years". That question has an answer, and it is different for almost every portfolio.
The capital gains tax
A transfer to a company you control is a disposal to a connected person at market value under ss.17–18 TCGA 1992, regardless of what is paid. If no relief applies, the entire latent gain crystallises immediately at 18% within the basic rate band and 24% above it — with no sale proceeds to pay it from.
Illustrative only. A portfolio worth £900,000 was acquired for £400,000. The latent gain is £500,000. Deducting the £3,000 annual exempt amount leaves £497,000, and at 24% that is £119,280 of tax on a transaction where no cash changed hands at all.
Relief defers the gain by reducing the base cost of the shares received. The conditions are strict: the business must be transferred as a going concern, with all of its assets (cash may be excluded), in exchange wholly or partly for shares. Where only part of the consideration is shares, only that proportion is deferred.
Incorporation relief used to apply automatically. 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, with brief details of the transaction, the tax computations and the type of business transferred. Section 162A TCGA 1992 is repealed — the old election out is gone. Legislation: section 39 of the Finance Act 2026. An incorporation that qualified perfectly and was then written up carelessly at the return can now lose the relief.
The real gate
Section 162 relieves the transfer of a business. "Business" is not defined in TCGA 1992, takes its ordinary meaning, and is wider than "trade". HMRC follows the Upper Tribunal decision in Ramsay v HMRC, where Judge Berner held that 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.
HMRC's stated indicator is specific: 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.
Read that against a real portfolio. Twelve flats managed entirely by a letting agent, with the owner approving repairs by text and reading a statement each month, is a portfolio. Six properties where the owner does the lettings, the viewings, the maintenance scheduling, the compliance and the refurbishments personally is much closer to a business. Property count is not the test. Personal activity is.
This is where most incorporation plans should stop, and it is the question to answer first — before anybody has drafted anything — because the entire capital gains position depends on it.
The stamp duty
A transfer to a connected company is charged on the market value of the property under s.53 FA 2003, not on what changes hands. Three charges then stack:
Illustrative only, England, one dwelling. A house worth £900,000 is transferred to a company the landlord controls. On the higher rates for additional dwellings the charge is 5% on the first £125,000 (£6,250), 7% on the next £125,000 (£8,750) and 10% on the remaining £650,000 (£65,000) — total £80,000. If the 17% flat rate applies instead because no relief is available, the charge is 17% of £900,000, or £153,000. Both figures are payable on a transfer where nobody received any money.
Under paragraph 18 of Schedule 15, Finance Act 2003, where a chargeable interest passes from a partnership to a partner or a person connected with a partner, chargeable consideration is market value minus the sum of the lower proportions, determined under paragraph 20. Mechanically: for each relevant owner you 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 those together. Where partners take shares in the company in the same proportions as their partnership shares, the sum of the lower proportions approaches 100 and the chargeable consideration approaches nil.
Two limits on that, and both are load-bearing. Paragraph 18 is expressly subject to paragraph 24, the anti-avoidance provision, which is the provision HMRC uses against partnership-incorporation planning. And the route requires a genuine partnership to exist beforehand — a jointly held portfolio between spouses is not automatically a partnership. This is not a route to treat as a reliable path to nil stamp duty.
Jurisdiction. Everything above is Stamp Duty Land Tax, which applies in England and Northern Ireland. Wales has Land Transaction Tax, with higher residential rates from 11 December 2024 running to 17% and no first-time buyer relief. Scotland has Land and Buildings Transaction Tax plus an Additional Dwelling Supplement of 8% for transactions on or after 5 December 2024. Never apply one nation's rates to another's property — run the numbers in the stamp duty calculator, which covers all three.
Profits are retained and reinvested rather than drawn, so the second layer of tax is deferred rather than paid.
The portfolio is geared enough that full interest deductibility outweighs the double layer.
The activity is genuinely a business on the Ramsay test, so section 162 relief is available on the gain.
A genuine partnership already exists so paragraph 18 relief is in point, or the stamp duty is small relative to the ongoing saving.
From 6 April 2027 the case strengthens for this landlord, because personal property income moves to 22%, 42% and 47% while companies are not mentioned in the measure.
You need the income personally. Corporation tax at 19–25% then dividend tax at 10.75% or 35.75% is more than one layer of income tax.
The portfolio is unencumbered or lightly geared. There is little interest to shelter, so Section 24 was never the problem being solved.
There is a large latent gain and no business. The gain crystallises in full, at 18% or 24%, with nothing coming in to pay it.
Stamp duty on market value cannot be relieved. An £80,000 or £153,000 entry cost takes a very long time to earn back.
Four costs are routinely underweighted: refinancing fees, higher commercial mortgage rates, ATED exposure, and the loss of the CGT annual exempt amount inside a company.
The costs nobody counts
None of those appear in the comparison people usually arrive with, which is corporation tax against income tax. All four are real cash.
Most of the value here is in the first two steps, because they end a good number of incorporation plans before anybody has spent anything.
Your actual weekly activity assessed against the Ramsay position and HMRC's 20-hour indicator, before any structure is designed around a relief you may not get.
CGT at market value with and without section 162 relief, stamp duty in the right regime, refinancing and legal costs — one number for what it costs to get there.
Incorporation calculatorPersonal versus company across corporation tax, extraction at the post-April 2026 dividend rates and the April 2027 property income rates, on your real figures.
Whether a genuine partnership exists, what paragraph 18 would give, and a straight answer about paragraph 24 rather than a promise of nil stamp duty.
Where you do proceed, the section 162 claim made in the transferor's Self Assessment return for the year of transfer, with the details the new rules require.
Told plainly, with the arithmetic that produced it. A recommendation not to incorporate is the most common honest outcome of this conversation.
The full guideWe do not advise on whether to buy, sell, gear up or refinance. That is investment and mortgage territory, and it belongs with a regulated broker or adviser. We explain how the tax rules work and what a given course of action would cost in tax; the investment decision stays yours.
We will also not present incorporation as a fix for Section 24, because it is not one. It is a change of ownership with a price attached, and the whole job is working out whether the price is recovered. Related reading: landlord tax returns for the personal position, property company accounts for the corporate one, and the Section 24 calculator for what the restriction is costing you today.
It removes the restriction, which is not the same as solving the problem. Companies are outside the finance cost restriction, so mortgage interest is fully deductible against corporate profits. But getting there is a disposal of every property to a connected person at market value, which crystallises the whole latent gain unless incorporation relief applies; a stamp duty charge on market value even though no money changes hands; and a second layer of tax on every pound you later take out, at dividend rates that rose on 6 April 2026. The price is paid at the start and the benefit accrues slowly. Whether it is worth paying depends on figures, not on the principle.
A transfer to a company you control is a disposal to a connected person, and sections 17 and 18 of TCGA 1992 charge it at market value regardless of what actually changes hands. Without relief, the entire latent gain crystallises at 18% or 24%, with no sale proceeds to pay it from. Incorporation relief under section 162 of TCGA 1992 can defer it by reducing the base cost of the shares, but only where a business is transferred as a going concern, with all of its assets apart from cash, wholly or partly in exchange for shares. Where only part of the consideration is shares, only that proportion is deferred.
This is the gate almost everything turns on. 'Business' is not defined in TCGA 1992, takes its ordinary meaning, and is wider than 'trade'. HMRC follows the Upper Tribunal decision in Ramsay v HMRC, where Judge Berner held that it is the degree of activity as a whole that is material, not the extent of that activity compared with the number of properties or lettings. HMRC's stated 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 run by a letting agent will struggle on that test however many properties it contains.
Normally yes, and on market value. Section 53 of the Finance Act 2003 charges a transfer to a connected company on the market value of the property rather than on what is paid for it. The company pays the higher rates for additional dwellings, five percentage points above the standard rates since 31 October 2024, and the 17% flat rate applies to any dwelling over £500,000 unless property rental business relief is available. Partnership relief under paragraph 18 of Schedule 15 can reduce the charge where a genuine partnership already exists, but paragraph 18 is expressly subject to the paragraph 24 anti-avoidance provision. This is England and Northern Ireland; Wales and Scotland have their own regimes.
Yes, and it is easy to miss because it changes procedure rather than substance. Incorporation relief used to apply automatically where the conditions were met. 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 of TCGA 1992, the old election out, is repealed. The legislation is section 39 of the Finance Act 2026. The consequence is that an incorporation done properly and then written up carelessly at the return can lose a relief it plainly qualified for.
Four conditions tend to have to hold together. Profits are retained and reinvested rather than drawn, so the second layer of tax is deferred rather than paid. The portfolio is geared enough that full interest deductibility outweighs that second layer. The activity is genuinely a business on the Ramsay test, so section 162 relief is available on the gain. And either a genuine partnership already exists so partnership relief is in point on the stamp duty, or the stamp duty is small relative to the ongoing saving. Where the landlord needs the income personally, or the portfolio is lightly geared, or there is a large latent gain and no business, it usually costs more than it saves.
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FreeAgent PartnerWe cost it on your figures: your portfolio, your borrowing, the gain on each property and how you take income, with the cost of moving into a company and how long it takes to pay back.
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