Moving rental properties into your own company is treated as a sale at market value, so it can create a Capital Gains Tax bill for you and a Stamp Duty Land Tax bill for the company. Incorporation relief under section 162 of the Taxation of Chargeable Gains Act 1992 can defer the gain, but only if the letting amounts to a business transferred as a going concern for shares, and for transfers from 6 April 2026 it must be claimed. SDLT has no equivalent general relief, except in limited cases such as a genuine partnership.

Why does moving properties into a company cost anything?

You and a company you control are connected persons. For CGT, a transfer between connected persons is treated as made at market value, whatever the company actually pays, so every property with a gain since you bought it produces a chargeable gain. HMRC’s Capital Gains Manual (CG65740) confirms the market value rule applies to incorporation. For SDLT, section 53 of the Finance Act 2003 says that where the buyer is a company and the seller is connected with it, or the company issues shares as payment, the chargeable consideration is at least the market value of the property.

The result is two separate charges on one event, and the reliefs for each work quite differently. This page deals with property; the general mechanics of the CGT relief are explained in incorporation relief.

When does incorporation relief apply to a rental portfolio?

Section 162 applies where a person other than a company transfers a business as a going concern, with all its assets (or all except cash), to a company wholly or partly in exchange for shares issued to that person. The gain is rolled into the base cost of the shares instead of being taxed now. Three conditions cause trouble for landlords:

  • There must be a business. Section 162 says business, not trade, and HMRC accepts that a property letting activity can qualify. The leading case is Ramsay v HMRC [2013] UKUT 0226 (TCC), where the Upper Tribunal looked at the degree of activity as a whole: a serious undertaking earnestly pursued, carried on with continuity and on sound business principles. HMRC guidance at CG65715 says relief should be accepted where an individual spends 20 hours or more a week personally on activities indicative of a business, and that cases below 20 hours need careful consideration on the facts. A couple of flats let through a managing agent with little personal involvement is unlikely to qualify.
  • The whole business must move. All the assets of the business, other than cash, must be transferred. Keeping one property back, or transferring only the most profitable properties, risks losing relief on all of them.
  • The payment must include shares. Any part of the price paid in cash or credited to a loan account is other consideration, and the proportion of the gain matching it is taxed now.

How do mortgages affect the relief?

In strict law, liabilities the company takes over are extra consideration that would restrict relief. Extra Statutory Concession D32 (CG65745) lets HMRC ignore business liabilities assumed by the company when measuring other consideration, so taking over the buy to let mortgages does not by itself create a taxable amount. Personal liabilities, including tax owed on the business, are not covered.

The concession does not help with the second limit. The cost of the new shares is the net value of the business, broadly assets less liabilities, and section 162(4) caps the relief at that cost. A heavily geared portfolio can therefore have a share cost lower than the gain, and the excess is taxed immediately (CG65740 and CG65765).

Illustration only. A landlord transfers properties worth £1,000,000 with a combined base cost of £600,000, so the gain is £400,000.

Mortgages £500,000 Mortgages £800,000
Net value, so cost of shares £500,000 £200,000
Relief (capped at share cost) £400,000 £200,000
Gain taxed now Nil £200,000
Base cost of shares after relief £100,000 Nil

In the second column a higher rate taxpayer would pay CGT at 24% on £200,000, before the annual exempt amount, and would need to file a residential property return within 60 days. The company’s base cost in the properties is their market value at transfer in both cases.

How do you claim incorporation relief from April 2026?

Before 6 April 2026 the relief applied automatically and could be switched off by an election under section 162A. For transfers on or after 6 April 2026 the relief must be claimed and section 162A elections are no longer available. HMRC guidance at CG65735 says the claim is normally made in or with the tax return for the year of transfer and must include a description of the business, the company name and registration number, the number, type and issue date of the shares, the value of each chargeable asset and the non chargeable assets, the cost of the shares and the relief claimed. The time limit is the first anniversary of the 31 January following the tax year of transfer, so a transfer in 2026 to 2027 must be claimed by 31 January 2029.

A claim does not change the 60 day reporting rules for UK residential property. If CGT is due within 60 days, for example because only partial relief is available, the section 162 claim details should be provided with that return and again in the annual return.

What will the company pay in Stamp Duty Land Tax?

Because the consideration is deemed to be market value, the company pays SDLT as if it had bought the properties at full price. In England and Northern Ireland a company buying a dwelling for £40,000 or more pays the higher rates, which are the residential rates plus a 5% surcharge, and a single dwelling over £500,000 is charged at 17% unless the property rental business relief applies. Scotland and Wales charge Land and Buildings Transaction Tax and Land Transaction Tax instead, with their own rules.

Two features of the SDLT rules can change the result:

  • Six or more dwellings in one transaction. Section 116(7) of the Finance Act 2003 treats six or more separate dwellings transferred in a single transaction as not residential, so non residential rates apply. On the current table these are 0% up to £150,000, 2% on the next £100,000 and 5% above £250,000.
  • Transfers out of a partnership. Where property moves from a partnership to a partner or a person connected with a partner, Schedule 15 paragraph 18 sets the chargeable consideration by reference to market value reduced by the sum of the lower proportions, worked out under paragraph 20. Where individual partners are connected with the company, their partnership shares can count towards that sum, which can reduce or remove the charge. The property must genuinely be partnership property, and section 75A, the SDLT anti avoidance rule, can apply where a series of transactions produces less SDLT than a single direct purchase would.

The rates and surcharges are set out in Stamp Duty Land Tax explained.

What else needs sorting before the transfer?

  • Lenders. Existing personal buy to let mortgages cannot usually just be moved; the company will normally need new lending, which brings fees and possibly early repayment charges.
  • ATED. Any dwelling worth more than £500,000 brings the company into the Annual Tax on Enveloped Dwellings, with an annual Relief Declaration Return for commercially let property. See ATED.
  • The company. Shares must actually be issued to the transferor in exchange for the business; see how to incorporate a company.
  • The ongoing comparison. Incorporation only pays if the company structure saves more each year than the upfront cost. The running comparison is in buy to let through a limited company.

What mistakes come up most often?

  • Assuming incorporation relief is automatic. From 6 April 2026 there is no relief without a claim containing the required details.
  • Treating a passive investment as a business without evidence of the time and activity involved.
  • Leaving a property in personal names, so the whole business has not been transferred.
  • Crediting part of the value to a director’s loan account without realising that part of the gain is taxed now.
  • Forgetting that negative equity or high gearing caps the relief at the share cost.
  • Budgeting for CGT but not for SDLT at market value on the company’s acquisition.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.