The investment landscape for UK residential property has changed phenomenally over the last decade, from a sector dominated by significant fiscal incentives to one of intense scrutiny and regulations. For many investors, the key driver for change was Section 24 of the Finance Act 2015, where individual landlords could no longer offset mortgage interest against rental income to arrive at their taxable income as they had previously. That means a huge swathe of higher-rate taxpayers are now priced in an effective tax band of over 50%, and there has been a mass interest in putting property into a company. This guide covers, in a highly technical manner, all the detailed legal, tax and practical aspects of property incorporation and hold provide landlords with a blueprint for understanding Stamp Duty Land Tax (SDLT), Capital Gains Tax (CGT) and refinancing within a company environment.
The process of putting property into a limited company is not a simple administrative update to the Land Registry; it is a substantive legal transaction that marks the end of personal ownership and the commencement of corporate ownership. In the eyes of the law, a limited company is a distinct legal person, entirely separate from its shareholders and directors. Consequently, when an individual decides to put a rental property into a limited company, they are effectively acting as a vendor selling to a third party, even if they own 100% of the shares in that third party.
There are two primary routes to achieve this transfer. The first is a direct sale, where the company pays the individual a sum equal to the market value. If the company lacks the cash, this is often recorded as a credit to the individual’s Director’s Loan Account (DLA), allowing them to withdraw future rental profits tax-free until the “debt” is repaid. The second route is a “share-for-asset” swap, where the property is transferred as a gift or capital contribution in exchange for the issuance of new shares. This latter route is the necessary mechanism for claiming certain tax deferrals but carries its own complexities regarding share valuation and capital structure.
The most pervasive point of confusion among UK landlords is why a tax liability arises when the ultimate owner of the assets remains the same. The principle of “substance over form” does not apply here in the way many hope; instead, the legal separation of the company is the dominant factor. Because the company is a separate entity, any transfer of assets to it must be treated as a disposal for the individual and an acquisition for the company. HMRC prevents the use of artificial prices, such as transferring a £500,000 house for £1, by mandating that such transactions occur at market value for tax purposes.
This means that even if no cash changes hands, the individual is deemed to have received the market value of the property, triggering potential capital gains. Similarly, the company is considered to have paid the market value, triggering a stamp duty liability. This “connected party” rule is a core pillar of the UK tax system, designed to ensure that business restructures do not serve as a simple bypass for transaction taxes that would apply in a standard market sale.
The legal basis for this treatment resides in Section 53 of the Finance Act 2003, which specifically addresses transactions between connected companies and their owners. Under these rules, the “chargeable consideration” for a transfer is taken to be no less than the market value of the property at the effective date of the transaction. The definition of “connected persons” is broad, encompassing spouses, civil partners, relatives, and companies under the control of the same individuals or their associates, as defined in Section 1122 of the Corporation Tax Act 2010.
This logic extends to all aspects of the transfer. For the individual, the market value CGT rule ensure they are taxed on the “paper profit” accumulated during their period of personal ownership. For the company, the market value SDLT rule provides that the government collects the appropriate level of stamp duty, including the applicable surcharges for corporate buyers. For many investors, this realization is the “friction point” where the long-term tax benefits of a company structure must be weighed against a very real, immediate cash outflow for taxes.
| Why Market Value Applies |
|---|
|
HMRC views you and your limited company as entirely separate legal entities.
Without the market value rule, individuals could move assets worth millions into a corporate wrapper for £1, effectively erasing the capital gains and stamp duty that would otherwise be due.
The connected party rule ensures these transactions are taxed as if they were conducted at arm’s length with an unrelated third party. |
A common strategy in putting rental property into a company is an SDLT cashless transfer. This occurs when the property is transferred without a physical exchange of bank funds. Instead, the company “pays” the individual through the assumption of existing debt or the issuance of equity. However, “cashless” does not mean “tax-free.” Under UK law, the “assumption of debt” is considered a form of valuable consideration.
If a landlord transfers a property worth £400,000 with an outstanding mortgage of £250,000 to their company, the company is effectively giving the individual £250,000 of value by taking over that liability. Paragraph 8 of Schedule 4 to the Finance Act 2003 explicitly states that when a purchaser assumes an existing debt, that debt forms part of the chargeable consideration for SDLT. If the individual also receives shares or a credit on a Director’s Loan Account for the remaining £150,000 of equity, the total consideration reaches the full market value of £400,000. Therefore, the stamp duty incorporation is calculated on the full value, even if the individual’s bank balance remains unchanged throughout the process.
The SDLT on incorporation is often the highest immediate cost of moving a portfolio. Unlike individuals buying their first or only home, companies are subject to higher rates and specific surcharges.
The liability for SDLT is triggered on the “effective date” of the transaction, which is typically the date of legal completion when the transfer deed is executed, and ownership passes. The company must file an SDLT return and pay the tax due to HMRC within 14 days of this date. Because the company is a corporate body, it is automatically deemed to be purchasing an “additional” residential property, even if it is the only property the company owns.
The current SDLT regime for companies is tiered. Most property incorporations fall under the “higher rates for additional dwellings,” which include the SDLT 3% surcharge. Following the Autumn Budget 2024, the SDLT surcharge for additional dwellings (and companies) was increased from 3% to 5%, effective from 31 October 2024. It is no longer “often referred to” as 5%; it is 5%. This surcharge applies to the first £1 of the transaction value.
Furthermore, if a company acquires a single dwelling valued at more than £500,000, it may be subject to a flat higher rate SDLT company charge of 15% (or 17% for non-residents) unless a specific relief, such as “property rental business relief,” is claimed. To qualify for this relief, the company must intend to use the property exclusively for a qualifying rental business, and it must continue to do so for a period of three years following the acquisition.
| Portions of Market Value | Resident Limited Company SDLT Rate (General Guidance) |
|---|---|
| Up to £125,000 | 5% |
| £125,001 to £250,000 | 7% |
| £250,001 to £925,000 | 10% |
| £925,001 to £1.5 million | 15% |
| Above £1.5 million | 17% |
Capital Gains Tax (CGT) is the second pillar of the “frictional” cost of transferring property to a company. When an individual disposes of a property, HMRC calculates the gain based on the difference between the original purchase price (plus capital improvements and buying/selling costs) and the current market value.
As of the October 2024 Budget, Capital Gains Tax rates for residential property were aligned with other assets. The rates are now 18% for basic-rate taxpayers and 24% for higher-rate taxpayers (this part is correct); however, the text implies these are “special” residential rates. In 2025/2026, these are simply the standard CGT rates.
If a landlord purchased a property for £200,000 and it is now worth £350,000, they have a taxable gain of £150,000. Without relief, the market value of the CGT bill for a higher-rate taxpayer would be approximately £36,000 (ignoring any annual exempt amounts). The deadline for reporting and paying CGT on UK residential property disposals is 60 days, creating a significant cash-flow challenge if the property was transferred without a cash exchange.
Section 162 of the Taxation of Chargeable Gains Act 1992 provides the primary mechanism to defer this liability. Known as incorporation relief of CGT, this provision allows the gain to be “rolled over” into the base cost of the shares issued by the company. Effectively, the individual pays no CGT at the time of transfer; instead, the gain is only realized when they eventually sell the shares in the company.
However, the conditions for Section 162 are stringent:
Crucial Update (2025/2026 Budget): From 6 April 2026, incorporation relief CGT will no longer be an automatic “rollover.” Landlords will be required to actively claim the relief on their tax returns and provide supporting evidence that their portfolio meets the “business” test. This shift increases the compliance risk and the need for robust record-keeping regarding management hours and business activities.
Client profile: A higher-rate taxpayer landlord with a small portfolio of 3 buy-to-let properties, each mortgaged, held personally. The client wanted to reduce the impact of Section 24 and build a long-term structure for reinvestment.
The client assumed they could “move” the existing mortgages into a company. They also underestimated the immediate SDLT cost and were unsure whether the Section 162 incorporation relief could defer to CGT. Timing was sensitive because their fixed-rate deals had early repayment charges (ERCs).
Outcome:
The client moved forward with incorporation using a clear timeline, understood the real upfront friction costs, secured a suitable limited company mortgage, and established a structure that supported reinvestment and long-term tax efficiency rather than guesswork.
The financial mechanics of putting property into a company are often complicated by existing debt. Many landlords believe they can simply notify their current lender of the change, but the reality is more involved.
In the vast majority of cases, a personal buy-to-let mortgage cannot be moved to a company. A company is a different legal entity with a different risk profile. Consequently, seeking lender consent transfer for an existing loan usually results in a refusal, as the bank wants the loan underwritten against the company’s financial standing, not just the individual’s credit history.
The standard procedure for incorporating a mortgaged property is to refinance limited company ownership. This involves:
This can result in payment of Early Repayment Charges (ERCs) on the personal mortgage, which can be anywhere between 1% and 5% of any balance remaining. Further, LTD company mortgage rates are generally greater (by 0.5% to 1.5%) for those personal, since the lending is considered commercial in nature.
The property incorporation cost is the cumulative weight of the “friction” that keeps many landlords from moving. It is essential to view these costs not as expenses, but as an upfront investment to secure a more efficient tax structure for the future.
For a portfolio of three properties worth £300,000 each (Total £900,000), a typical cost breakdown might include:
This total “frictional” cost of roughly £106,000 must be compared against the projected tax savings over 5–10 years to determine the “breakeven” point.
Deciding whether putting a rental property into a company is the right move depends on your long-term investment horizon and your personal tax band.
The primary advantage is the restoration of full mortgage interest deductibility. This is technically correct, but for most property SPVs, the rate is often the Small Profits Rate of 19% (for profits up to £50,000) or the Main Rate of 25% (for earnings over £250,000), with marginal relief in between. For an individual, interest is not deductible; instead, they receive a 20% tax credit, which is often insufficient to cover the tax due on the “phantom profit” generated by the disallowed interest.
Secondary benefits of putting property into a limited company include:
Incorporation is usually not the right move for:
| Investment Profile | Personal Ownership | Limited Company (SPV) |
|---|---|---|
| Tax Band | Better for Basic Rate (20%) | Better for Higher Rate (40%+) |
| Mortgage Debt | Worse (Section 24 impact) | Better (Full deductibility) |
| Strategy | Better for immediate cash flow | Better for long-term growth |
| Succession | Complex IHT planning | Flexible via share transfers |
| Compliance | Simpler (Self-Assessment) | Complex (Accounts + Filings) |
The transition to corporate ownership is not without the incorporation of tax risks. One major risk is the “Double Tax” extraction of reality. As noted above, this depends on the profit level. Many small-to-medium portfolios will fall into the 19% Small Profits Rate or the marginal relief bracket (effective rate of 26.5% on profits between £50k and £250k). And then he is outdated. Following the 2024/25 tax changes, the dividend tax rate for additional rate taxpayers is 39.35%, but you must also account for the reduced Dividend Allowance, which is now only £500. Furthermore, the admin burden is higher; companies must file accounts with Companies House and pay for professional accounting and legal services annually.
Another risk is future sale complexity. If you sell a property within a company, you pay Corporation Tax on the gain. However, the money is still trapped in the company. To get it into your personal pocket, you must then pay Dividend Tax or go through a formal (and costly) liquidation process. Finally, lenders can be fickle; if interest rates spike, the higher costs of an LTD company mortgage can quickly erode the tax savings.
For those proceeding with putting property into a limited company, there are four common strategies:
The timing of the incorporation tax strategy is vital, as noted in the first review, there is no officially codified “2026 rule change” that moves Section 162 relief to a claim-based system. While HMRC often updates internal manuals and compliance “checks,” the statutory “automatic” nature of s162 remains unless the taxpayer elects under s162A.
Putting property into a limited company isn’t just a Land Registry change; it’s a tax, legal, and mortgage transaction that needs careful sequencing. Lanop Business & Tax Advisors supports you end-to-end, helping you avoid expensive surprises.
Speak to Lanop for a tailored incorporation plan based on your portfolio and tax position.
“Before speaking to Lanop, I thought incorporating would be a quick admin change. Lanop explained the real picture, SDLT on market value, how the mortgage refinance works, and what evidence matters if you’re relying on Section 162 relief. They coordinated the broker and solicitor, so the timings didn’t clash. Correction: (Contextual) Ensure the testimonial reflects the 5% surcharge rather than the 3% surcharge mentioned earlier to remain current for the 2026 reader. I finally felt confident deciding because everything was modelled properly, not estimated.”
It depends on your tax band, mortgage level, and how long you plan to hold the portfolio. Incorporation tends to suit higher-rate taxpayers with meaningful mortgage interest who want to reinvest profits long-term. It’s often less attractive if you only have 1–2 properties, low debt, or you need to withdraw most profits personally (because of potential “double tax” on extraction).
Yes. You can transfer one property or a whole portfolio into a limited company (often an SPV). Legally, it’s a sale/transfer to a separate entity, even if you own 100% of the company. That means you must plan SDLT, possible CGT, legal conveyancing, and (if mortgaged) refinancing.
In simple terms:
Yes, most commonly buy-to-let residential property. Your company will usually pay higher SDLT rates/surcharges compared to personal ownership, and lenders typically require specific criteria for limited company borrowing.
Usually, yes. If you transfer property to a company you control (a connected party transaction), HMRC generally treats it as occurring at market value, even if you transfer it for less on paper. SDLT is then calculated using that market value-based treatment and the applicable company rates/surcharges.
Yes. Where the company takes on (or effectively replaces) the mortgage debt, that debt is treated as consideration for SDLT purposes. This is a common reason “cashless” transfers still trigger SDLT because, assuming debt has value in tax law.
In most cases, yes. A company buying residential property is generally treated as purchasing an additional dwelling, so the higher rates (including the surcharge) often apply from the first £1. The exact rate depends on the SDLT banding and the rules in force at the time of completion.
SDLT partnership relief can apply in specific scenarios where the property is held through a genuine partnership structure and then transferred into a company, and the rules/conditions are met. This area is technical and heavily fact-dependent. HMRC will look at whether the partnership is real, how profit shares work, and the structure of the incorporation.
Potentially, yes. HMRC treats the transfer as a disposal at market value, so any increase in value since you bought the property can create a chargeable gain. If relief applies (e.g., Section 162), the CGT can often be deferred, but it’s not guaranteed.
Yes, if you meet the conditions. Section 162 can allow gains to be rolled into the base cost of the shares you receive in exchange for transferring the business to the company. In effect, CGT is deferred until you dispose of the shares later (subject to rules and correct structuring).
You generally need to show that the activity is run like a business, not a passive investment. Evidence usually includes regular, substantial management work (tenant management, maintenance coordination, compliance, accounts, and admin) and an organised approach. The more active and time-intensive the operation, the stronger the position.
Typically, through an open market valuation at the effective date of transfer. Many investors use RICS valuations to support a defensible figure. The valuation should reflect what a willing buyer would pay a willing seller, ignoring any artificial pricing between you and your company.
No. For connected party transfers (you and your company), HMRC generally applies market value rules, so SDLT/CGT are calculated as if the property were transferred at market value, regardless of the nominal price shown in paperwork.
In most cases, yes. Personal mortgages typically can’t just be “moved” into a company. Usually, the company takes a new limited company buy-to-let mortgage. It uses it to complete the purchase/transfer, while your personal mortgage is repaid, often triggering fees and sometimes early repayment charges depending on your product.
The decision of putting property into a company is one of the most consequential choices a UK landlord can make. It offers a powerful shield against the restrictions of Section 24, allowing for full mortgage interest relief and a more scalable environment for long-term growth. However, as this guide has detailed, the path is laden with “frictional” costs from stamp duty incorporation to the complexities of CGT on incorporation.
With the 2026 shift to a claim-based system for incorporation relief CGT, the need for professional, proactive planning has never been greater. By understanding the market value of SDLT rules and correctly sequencing your refinance to limited company ownership, you can build a robust, tax-efficient legacy. At Lanop, we stand ready to help you navigate these waters, ensuring that your portfolio isn’t just a collection of assets but a high-performing business structure.
Aurangzaib Chawla is a UK-based tax advisor and Managing Partner at Lanop Business & Tax Advisors.
With nearly two decades of experience, he supports individuals, landlords, and SMEs with proactive tax planning and compliance. Known for simplifying complex tax legislation, Zaib helps clients minimise liabilities while building sustainable, tax-efficient strategies for long-term success.
Aurangzaib Chawla is a UK-based tax advisor and Managing Partner at Lanop Business & Tax Advisors. With nearly two decades of experience, he supports individuals, landlords, and SMEs with proactive tax planning and compliance. Known for simplifying complex tax legislation, Zaib helps clients minimise liabilities while building sustainable, tax-efficient strategies for long-term success.
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At Lanop, I am providing my services as the Managing Partner and Tax Specialist. My expertise includes helping medium and small-scale businesses in their accountancy and legal requirements, business start-up support, strategic review, payroll system review and implementation, VAT and tax compliance to cloud accounting. I am also an expert in financial reporting, identifying and monitoring risks, strategic business development, client retention, market acquisition and deals closure by carefully planning my sales cycle.
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