Guide · 11 min read
What it actually costs to move a rental portfolio into a limited company: CGT, SDLT, Section 162 incorporation relief, partnership routes, and the refinance that funds it.
Written by Matt Lenzie · Published 10 June 2026
Advice from
Matt Lenzie · 25+ year career banker (Bank of Scotland, Lloyds Banking Group). £300m+ raised for property clients.
25+ year career banker (Bank of Scotland, Lloyds Banking Group). £300m+ raised for property clients.
Moving a rental portfolio into a limited company is three transactions wearing one name: a disposal of every property at market value for capital gains tax, a purchase of every property at market value for stamp duty, and a full refinance of every mortgage onto company terms. On a £1.2m portfolio with £400,000 of accrued gains, the unrelieved bill is roughly £95,000 of CGT, £124,000 of SDLT and £40,000 of refinancing costs, around £259,000 to carry on owning the same houses. With the two statutory reliefs properly in place, the tax element can fall to nil and the cost shrinks to the refinance. As of June 2026, the entire incorporation question is whether your facts genuinely support those reliefs, and this guide sets out the law, the numbers and the decision framework.
You and your limited company are connected persons. Under s.286 of the Taxation of Chargeable Gains Act 1992 (TCGA), transactions between connected persons are deemed to take place at open market value, whatever consideration actually changes hands. Gift the property to the company, sell it for £1, or sell it at full price: the CGT computation is identical, market value minus your original cost. The same logic applies on the SDLT side: s.53 of the Finance Act 2003 deems the chargeable consideration on a transfer to a connected company to be not less than market value.
So the default position, before any relief, in the 2025/26 tax year:
Take a representative case: six houses in England worth £1.2m in total, bought years ago for £800,000, so £400,000 of accrued gains; £780,000 of mortgage debt at 65% LTV; the owner a higher-rate taxpayer. The unrelieved cost of incorporation:
| Cost line | Computation | Amount |
|---|---|---|
| CGT | (£400,000 − £3,000 exempt) × 24% | £95,280 |
| SDLT, surcharged residential rates on £1.2m | 5% / 7% / 10% / 15% bands | £123,750 |
| SDLT alternative: 6+ dwellings, non-residential rates elected | 0% / 2% / 5% bands on £1.2m | £49,500 |
| Early repayment charges | say 2% average on £780,000 | £15,600 |
| New company mortgage arrangement fees | say 2% on £780,000 | £15,600 |
| Valuations, legals, two sets of conveyancing | six properties | £9,000-£12,000 |
| Worst case total | residential SDLT, no reliefs | ≈ £259,000 |
| Best case total | s.162 + partnership SDLT relief, ERCs timed away | ≈ £28,000 |
Two points from that table before the reliefs. First, where six or more dwellings are transferred in a single transaction, s.116(7) FA 2003 allows the non-residential SDLT rates to be applied instead of the surcharged residential rates, £49,500 rather than £123,750 here, a saving available on facts alone with no business test, and routinely missed. Second, the spread between £259,000 and £28,000 is the entire incorporation industry in one line: the reliefs are worth more than the underlying houses earn in years, which is exactly why HMRC polices them.
Section 162 TCGA 1992 defers the entire capital gain where a person transfers a business as a going concern, with the whole of its assets (cash can be left out), to a company wholly or partly in exchange for shares. The gain is not taxed at transfer; it is rolled into the base cost of the shares and crystallises only if the shares are eventually sold. For our worked case, £95,280 of CGT becomes nil today, with the £400,000 gain embedded in the company shares.
Everything turns on one word: business. Passive property investment, collecting rent through an agent on a handful of single lets, is not a business for s.162. The leading authority is Elizabeth Moyne Ramsay v HMRC [2013] UKUT 226 (TCC), in which the Upper Tribunal held that Mrs Ramsay's lettings activity qualified: she spent roughly 20 hours a week personally managing the block, dealing with tenants, maintenance, gardens and security, and had no other occupation. That 20-hours-a-week figure has become the practical benchmark advisers test against, although it is a guide from one case, not a statutory threshold: the tribunal's actual test was whether the activity was a serious undertaking earnestly pursued, with some degree of organisation, beyond what any passive owner would do.
The practical evidence pack we see succeed: a genuinely active portfolio (self-managed or actively directed, HMOs and multi-lets help), time records, a dedicated business bank account, and scale consistent with a livelihood rather than a sideline. HMRC will not give advance clearance on whether a lettings activity is a business, so the relief is self-assessed and defended later, which means the file is built before the transfer, not after the enquiry letter. Note also that s.162 requires the whole business to go in: cherry-picking three properties of ten into the company is not an incorporation for relief purposes, it is three connected-party disposals at market value.
CGT relief is statutory and fact-based. The SDLT side is narrower. There is no general SDLT incorporation relief: the default is market-value SDLT under s.53 FA 2003. The exception is Schedule 15 FA 2003: where land is transferred from a partnership to a company connected with the partners, the chargeable consideration is reduced by the partners' continuing economic interest (the sum of the lower proportions calculation). Where a husband-and-wife partnership incorporates into a company they own in the same shares, the chargeable proportion is nil: no SDLT.
This is where HMRC's attention concentrates, for an obvious reason: every joint owner of rental property would like to be a partnership the week before incorporating. Mere joint ownership is not a partnership. A partnership for these purposes is what the Partnership Act 1890 says it is, persons carrying on a business in common with a view of profit, and the same business-activity evidence as s.162 applies, plus partnership-specific markers: a partnership bank account, agreed profit shares, a written agreement, and ideally SA800 partnership tax returns. Advisers commonly want around three years of genuine partnership trading before relying on Schedule 15. The three-year figure also echoes the anti-avoidance architecture around partnership SDLT (the charging provisions in paragraphs 17A and related rules look back three years at changes in partnership shares), and a partnership formed months before incorporation invites both a Schedule 15 challenge and the general SDLT anti-avoidance rule in s.75A. HMRC's Spotlight 63 (October 2023) put marketed hybrid partnership schemes formally on notice, and several mass-market incorporation promoters' structures are under enquiry as of June 2026. The honest summary: a real, established partnership incorporates SDLT-free; a paper one bought from a seminar does not.
The least discussed cost is the one that runs through our desk. The company is a new borrower, so there is no novation of a personal-name buy-to-let mortgage into an SPV (special purpose vehicle): each loan is redeemed at completion and replaced with a new limited company buy-to-let mortgage, with full underwriting, new valuations, fresh legal work on both the transfer and the charge, and personal guarantees from the directors, supported where required by independent legal advice on the guarantee.
Three consequences follow. First, early repayment charges: redeeming six fixed rates mid-term at 2-5% each can add £15,000-£40,000 on a £780,000 book, which is why incorporations are sequenced around fixed-rate end dates, sometimes in two or three tranches across 18 months. Second, pricing: limited company products typically price 0.2-0.5 percentage points above the equivalent personal-name product as of June 2026, partly offset by the gentler 125% interest coverage ratio applied to companies. Third, execution risk: the transfer and the refinance must complete simultaneously on every property, because the seller's lender must be redeemed at the moment title moves. A six-property simultaneous completion is a project, and it is the part of an incorporation a broker rather than an accountant runs: we structure these as a single portfolio mortgage or a coordinated set of SPV mortgages, with a bridging facility as the contingency where one lender's timetable slips. The capitalised director's loan account created where the company owes you for equity transferred is a genuine compensation: it can be drawn back tax-free from future rental profits, a benefit personal ownership cannot replicate.
The annual prize is the difference between Section 24 personal taxation and corporation tax with full interest relief, quantified in our guide to Section 24 at portfolio scale: for the leveraged higher-rate landlord in that guide's ten-property example, £21,432 of personal tax against £5,700 of corporation tax on the same £30,000 real profit, a recurring saving of roughly £15,700 a year while profits are retained. Against that, the entry cost from the table above. The framework:
| Profile | Entry cost | Annual saving | Verdict |
|---|---|---|---|
| 40% taxpayer, 65-75% LTV, 10+ properties, reliefs available, reinvesting | ≈ £28,000 | ≈ £15,000+ | Pays back in ~2-3 years: incorporate |
| 40% taxpayer, reliefs available, but withdrawing all profits as dividends | ≈ £28,000 | Saving largely consumed by 33.75% dividend tax above the £500 allowance | Marginal: model extraction first |
| 40% taxpayer, passive book, no business case for s.162, no partnership | ≈ £259,000 | ≈ £15,000 | 17-year payback: do not incorporate, restructure at the edges |
| Basic-rate taxpayer or sub-40% LTV book | any | Little or nothing: Section 24 barely bites | Never pays: stay personal |
The variables that move the answer are always the same four: marginal tax rate, leverage, horizon, and whether profits are reinvested or extracted. Long horizon and retained profits favour the company; short horizon and full extraction favour doing nothing.
The structure we see most often from established portfolio landlords as of June 2026 is not a full incorporation at all. It is a fork: every new purchase goes into the company from day one, no CGT, no transfer SDLT beyond the ordinary purchase charge, full interest deductibility from completion, while the legacy personal-name book is managed down the Section 24 cost with cheaper tools: spousal rebalancing via declaration of trust, amortisation on the highest-interest loans at each remortgage, and selective disposal of the weakest performers with gains harvested against the £3,000 exemption and the 18% band where possible. The legacy book then either incorporates later, when fixed rates align and the partnership evidence has matured, or simply runs off. It is less elegant than a single grand restructure, and considerably cheaper than getting one wrong. Run your own two-route comparison through the limited company vs personal calculator before anyone, including us, proposes the transaction.
Not by default. A transfer to your own company is a disposal at full market value for capital gains tax (because you and the company are connected persons under s.286 TCGA 1992) and a land transaction at market value for stamp duty land tax (s.53 Finance Act 2003), regardless of what the company actually pays. Tax can be reduced or eliminated only where specific reliefs apply: Section 162 incorporation relief for CGT where the lettings activity qualifies as a business, and the Schedule 15 partnership rules for SDLT where a genuine partnership has been trading.
Section 162 of the Taxation of Chargeable Gains Act 1992 rolls the capital gain on incorporation into the base cost of the shares received, deferring CGT entirely, provided the whole business (other than cash) is transferred as a going concern wholly or partly in exchange for shares. The critical condition is that the lettings activity must amount to a business rather than passive investment. The benchmark case is Elizabeth Moyne Ramsay v HMRC [2013] UKUT 226, where around 20 hours a week of personal activity on the property business was held sufficient.
By default, SDLT is charged on the full market value at the surcharged residential rates, which since 31 October 2024 include a 5% additional dwelling surcharge in England and Northern Ireland (Scotland charges 8% ADS under LBTT). On a £1.2m portfolio that is £123,750 at surcharged residential rates, or £49,500 if six or more dwellings are transferred in one transaction and the non-residential rates are elected. Where the property is transferred from a genuine partnership to a company controlled by the same partners, Schedule 15 FA 2003 can reduce the SDLT to nil.
Yes, in effect. A limited company is a different legal borrower, so a personal-name mortgage cannot simply be relabelled: each existing loan must be redeemed and replaced with a new limited company buy-to-let mortgage, with new underwriting, new valuations, new legals and personal guarantees from the directors. Any early repayment charges on the existing fixed rates fall due, which is why incorporations are usually timed to fixed-rate expiry dates.
HMRC accepts incorporation of genuine, established partnerships, but actively challenges arrangements where a partnership is created shortly before incorporation mainly to capture the Schedule 15 SDLT treatment. HMRC has also publicly warned against marketed hybrid partnership schemes in Spotlight 63 (October 2023). Advisers commonly look for around three years of genuine partnership trading, with its own bank account, profit shares and ideally a partnership tax return, before relying on the relief.
The strongest cases combine four features: the landlord pays 40% or 45% income tax, leverage is high so the Section 24 interest restriction bites hard, profits are reinvested rather than withdrawn (avoiding dividend tax), and the holding horizon is long enough to amortise the entry costs, typically three to five years where reliefs apply. Incorporation rarely pays for basic-rate taxpayers, low-leverage portfolios, or landlords planning to sell within a few years.
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