Transferring Property to a Limited Company

Many UK landlords are exploring whether it makes sense to transfer their rental properties into a limited company. The strategy, known as property incorporation, has grown in popularity since the government restricted mortgage interest relief for individual landlords. For some, incorporation can reduce the overall tax burden and provide long-term benefits for succession planning. For others, it creates large upfront costs in the form of Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT).

What Does It Mean to Transfer Property to a Limited Company?

Transferring a property into a company you own is not just a paper exercise. In law, it is treated as if you sold the property to the company at its full market value and the company purchased it from you. This applies even if no money changes hands.

Because HMRC treats the transaction as a sale, you may become liable for CGT on any increase in value since you originally bought the property, and the company may be required to pay SDLT based on its current value. If the property has an outstanding mortgage, you must also inform your lender. In most cases, the loan will need to be refinanced under the company’s name, usually at a higher interest rate than individual buy-to-let mortgages.

The Process of Incorporation

The first step is to establish a limited company, often set up as a Special Purpose Vehicle (SPV) for property investment. You should then obtain an up-to-date market valuation of the properties to understand the potential tax exposure. A solicitor will handle the transfer of title deeds, Land Registry filings, and ensure tenancy agreements are updated so the limited company becomes the new landlord.

If the properties are mortgaged, you must refinance them under the company’s name. Lenders often view corporate borrowers as higher risk, which means they may be subject to higher rates or stricter conditions. Finally, all relevant taxes—such as CGT and SDLT—must be calculated and paid, unless you qualify for reliefs.

Tax Consequences of Transferring Property

The biggest concern for most landlords is taxation. CGT is usually triggered because HMRC treats the transfer as a disposal of the asset. The tax is charged on the increase in value from the original purchase price to today’s market value. For residential property, gains are taxed at 18% for basic rate taxpayers and 28% for higher rate taxpayers (HMRC CGT guidance).

Some landlords may qualify for Incorporation Relief under section 162 of the Taxation of Chargeable Gains Act 1992. This allows the CGT bill to be deferred, provided you are running a genuine property business rather than simply holding one or two investment properties. HMRC considers the scale of activity, the number of properties, and the time spent managing tenants when determining whether to grant this relief.

At the same time, the company must pay SDLT on the market value of the property being transferred. For companies, the 3% additional property surcharge applies to all acquisitions (HMRC SDLT guidance). In limited circumstances, landlords who have been operating a property business as a formal partnership may qualify for SDLT relief under Schedule 15 of the Finance Act 2003, but this is subject to strict conditions.

Once the property is inside the company, profits are no longer taxed as personal income. Instead, they fall under Corporation Tax. From April 2023, the rate is 19% for profits up to £50,000 and 25% for profits above £250,000, with marginal relief in between (HMRC Corporation Tax rates). For higher-rate taxpayers who would otherwise pay 40% or 45% on rental income, this can represent a substantial saving over time.

Can CGT and SDLT Be Avoided?

For most landlords, CGT and SDLT are unavoidable when transferring property to a company. HMRC requires that related-party transfers are valued at full market value, even if you try to sell the property for £1 or gift it.

That said, there are two main reliefs that can help in certain situations. Incorporation Relief may defer CGT if you are genuinely operating as a property business. Partnership Relief may mitigate SDLT if a bona fide property partnership is incorporated. Both of these require strong evidence and careful structuring. HMRC has successfully challenged cases where landlords attempted to rely on artificial arrangements, particularly those involving informal family partnerships.

Risks of Trying to Avoid Tax

Some landlords are tempted by schemes or shortcuts designed to sidestep tax, but these carry significant risks. HMRC can reassess the transaction, disallow reliefs, and charge both the original tax plus penalties and interest. If you fail to notify your lender and simply “transfer” ownership informally, you could also be in breach of mortgage terms—potentially leading to repossession.

Another risk is the “transactions in land” rule under the Income Tax Act 2007. If HMRC decides that the transfer was motivated mainly by short-term profit, it could tax the proceeds as income rather than a capital gain, resulting in an even higher tax bill.

Benefits of Incorporation

Despite these challenges, incorporation offers long-term advantages for many landlords. Corporation Tax rates are significantly lower than higher-rate personal tax bands, allowing landlords to reinvest profits more efficiently. Unlike individuals, companies can deduct mortgage interest in full, which can improve cash flow.

Incorporation also offers legal and succession benefits. As a limited company is a separate legal entity, your personal assets are protected from property-related liabilities. It also makes succession planning easier, as shares in the company can be transferred more flexibly than physical property. With the right structure, incorporation may also offer inheritance tax advantages; however, this is a complex area that requires specialist advice.

Weighing the Disadvantages

On the other hand, incorporation is not always worthwhile. The upfront costs of CGT and SDLT can be prohibitive, especially for landlords with only one or two properties. Mortgage rates are typically higher for companies, and lenders may demand larger deposits. Running a company also incurs ongoing compliance costs, such as statutory accounts, corporation tax returns, and filings with Companies House.

Is Incorporation Right for You?

In general, incorporation makes the most sense for higher-rate taxpayers with multiple rental properties who plan to grow their portfolio. For landlords with smaller holdings or those who rely heavily on rental income for living costs, the costs may outweigh the benefits.

Ultimately, the decision depends on your tax position, investment goals, and succession planning needs. The key is to model the numbers carefully and obtain professional advice before committing.

Our Advice 

Transferring property into a limited company can reduce long-term tax liabilities and provide greater flexibility, but it is rarely a tax-free exercise. CGT and SDLT usually apply unless you qualify for specific reliefs, and HMRC takes a strict approach to landlords who attempt to avoid these costs without genuine grounds.

At Tax Accountant, our property tax specialists help landlords assess whether incorporation is worthwhile. We calculate your exposure to CGT and SDLT, test eligibility for reliefs, and design tax-efficient strategies that keep you compliant with HMRC while maximising savings.

Book a consultation today to explore whether property incorporation could save you tax and strengthen your investment strategy.