Section 162 TCGA relief used to apply by itself when a business was transferred to a company. For transfers on or after 6 April 2026 it has to be claimed in the transferor's Self Assessment return for the year of transfer, and the old election out at section 162A is repealed.
Article · 15 July 2026
A landlord who moves a portfolio into a company has always relied on section 162 TCGA 1992 to defer the capital gain. Until now, that relief applied automatically when the conditions were met — you did not have to ask for it, and section 162A existed precisely so that somebody who did not want it could elect out.
That has changed. 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. Section 162A is repealed. The legislation is section 39 of the Finance Act 2026, which received Royal Assent on 18 March 2026.
It sounds like a filing formality. It is not, because of what happens in its absence.
HMRC's published process requires the claim to be made in the return for the tax year in which the transfer took place, with brief details of the transaction, the tax computations, and the type of business transferred.
Read that list again. "The tax computations" means the capital gains computation for every property in the portfolio — market value at transfer, base cost, enhancement expenditure, the gain, and the proportion deferred — has to exist and be summarised at the point the return is filed. That is work that used to be done, if at all, when HMRC asked. Now it is part of the claim.
A transfer of property to a company you control is a disposal to a connected person at market value under sections 17 and 18 TCGA 1992, regardless of what actually changes hands. No cash needs to move for a taxable gain to arise. Without relief, the whole latent gain crystallises immediately.
Take a portfolio worth £1.2m at transfer with a base cost of £600,000. The figures are illustrative.
Payable, in the ordinary course, on a transaction that produced no cash to pay it with. And because UK residential property disposals must be reported and paid within 60 days of completion, the timing problem arrives long before the return that was supposed to carry the claim.
That is the shape of the risk the new rule creates: not a penalty, but a landlord who incorporates, tells nobody, files a return that says nothing about it, and finds the transaction assessed as an unrelieved market value disposal.
Section 162 only ever applied to the transfer of a business, as a going concern, with all its assets — cash may be excluded — in exchange wholly or partly for shares in the company. Where consideration is only partly in shares, only a proportion of the gain is deferred. The gain is deferred by reducing the base cost of the shares, so it is a deferral and not an exemption: it comes back when the shares are sold.
"Business" is not defined in TCGA 1992. It takes its ordinary meaning, it is wider than "trade", and HMRC follows Ramsay v HMRC in the Upper Tribunal. Judge Berner put the test this way: 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 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 end to end by a letting agent, where the owner's involvement is reading a monthly statement, will struggle on that test whatever its size.
Under the old automatic relief, an incorporation could pass without HMRC ever examining whether a business existed. A claim that carries brief details of the transaction, the computations and the type of business transferred puts that question in front of HMRC at the point of filing. If the honest answer to "what business was transferred?" is "some houses and an agent's contract", that is worth knowing before the transfer, not after.
Incorporation relief deals with capital gains tax. Three other costs are unaffected by it, and any one of them can be larger.
Stamp duty on market value. A transfer to a connected company is charged on market value under section 53 Finance Act 2003, not on what changes hands. The company pays the higher rates with the 5-point additional dwellings surcharge, and the 17% flat rate applies to any single dwelling over £500,000 unless a relief such as property rental business relief applies. On an illustrative £1.2m portfolio of four £300,000 houses, the higher rates alone produce £20,000 per house — £80,000 — before any question of linked transactions is considered.
Partnership relief is not a switch you can flick. Paragraph 18 of Schedule 15 to the Finance Act 2003 charges a transfer from a partnership to a partner or a connected person on market value less the "sum of the lower proportions" computed under paragraph 20, which in the right circumstances approaches nil. But paragraph 18 is expressly subject to paragraph 24, the anti-avoidance provision HMRC uses to attack exactly this planning, and the route requires a genuine partnership to have existed beforehand. Jointly held property between spouses is not automatically a partnership. Anyone who has been told this reliably delivers nil stamp duty has been told half of it.
The second layer of tax on the way out. Corporation tax at 19% to 25%, with an effective 26.5% in the marginal band, and then dividend tax at 10.75% or 35.75% since 6 April 2026. Refinancing costs, commercial mortgage rates and the loss of the capital gains annual exempt amount inside a company all sit on the same side of the ledger.
The full picture — when incorporating genuinely pays, and when it plainly does not — is on incorporating a property portfolio and in the incorporation guide. The incorporation calculator handles the ongoing arithmetic; it cannot tell you whether you have a business. This is information about how the relief works, not advice on a particular transfer.
What has changed in landlord tax, the dates coming up, and one number worth checking on your own portfolio.
It stopped being automatic. For transfers of a business on or after 6 April 2026, section 162 TCGA 1992 relief must be claimed in the transferor's Self Assessment return for the tax year of the transfer, and the claim has to include brief details of the transaction, the tax computations and the type of business transferred. Section 162A, the old election out of automatic relief, is repealed because it is no longer needed. The legislation is section 39 of the Finance Act 2026. Nothing about the underlying conditions changed: the transfer must still be of a business, as a going concern, with all its assets, in exchange wholly or partly for shares.
The relief is not given, and the transfer stands as what it is: a disposal to a connected person at market value under sections 17 and 18 TCGA 1992, whatever was actually paid. The whole latent gain crystallises. Illustratively, a portfolio worth £1.2m with a base cost of £600,000 produces a £600,000 gain, and after the £3,000 annual exempt amount that is £597,000 taxed at 24%, or £143,280, on a transaction that generated no cash. UK residential disposals also have to be reported and paid within 60 days of completion, so the deadline arrives well before the return that was meant to carry the claim.
That is the real gate and it has not moved. Business is not defined in TCGA 1992, takes its ordinary meaning and is wider than trade, and HMRC follows Ramsay v HMRC in the Upper Tribunal, where Judge Berner said it is the degree of activity as a whole which is material, not the extent of that activity compared to the number of properties or lettings. HMRC's stated 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, where the owner reads a monthly statement, is the hard case.
No. Section 162 is a capital gains relief only. Stamp duty is charged separately, on market value, because the transfer is to a connected company under section 53 Finance Act 2003, and the company pays the higher rates including the 5-point additional dwellings surcharge, plus the 17% flat rate on any single dwelling over £500,000 unless a relief applies. Partnership relief under paragraph 18 of Schedule 15 Finance Act 2003 can reduce the chargeable consideration substantially, but it is expressly subject to the anti-avoidance provision in paragraph 24 and it requires a genuine partnership to have existed first. Jointly held property between spouses is not automatically a partnership.
No, it is deferred rather than removed. The gain is held over by reducing the base cost of the shares you receive in the company, so it comes back into charge when those shares are eventually sold. If the consideration is only partly in shares, only a corresponding proportion of the gain is deferred and the balance is taxable immediately. That matters for anyone leaving value on a director's loan account as part of the transfer, because loan account consideration is not share consideration. It also means the company route does not wipe the slate clean; it moves the historic gain from the properties onto the shares, where it sits until a future disposal.
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