More landlords in the UK are moving their properties into limited companies to pay less tax. According to UK Finance, over half of landlords, 53%, intend to purchase their next rental property within a limited company structure. It is easy to see why so many are looking at this option, but the process is not as simple as it sounds.
There are taxes to think about before, during, and after the move. Capital Gains Tax, Stamp Duty Land Tax, and Corporation Tax can all come into play. Some landlords end up paying more than they expected because they did not plan. Knowing what to expect makes a big difference.
A lot of landlords started looking at transferring property to a limited company when the government changed the rules on mortgage interest. Before April 2020, landlords could take away their full mortgage interest from their rental income before working out how much tax they owed. That is no longer the case. Now, individual landlords only get a basic rate tax credit, which is 20%. If you pay Income Tax at 40% or 45%, this change hits hard.
A limited company works differently. It can still take away mortgage interest as a full business cost, so you are only paying tax on what is left over. On top of that, companies pay Corporation Tax instead of Income Tax. For the 2025/26 tax year, the main Corporation Tax rate is 25% for profits above £250,000 and 19% for profits up to £50,000. For many landlords, that is still lower than the 40% or 45% they would pay as an individual.
Another big reason landlords consider this move is what happens to the money they make. Inside a company, profits that stay in the business are not taxed at the personal rate straight away.
That means you can hold onto more money and reinvest it into your portfolio. You only pay personal tax when you take money out as a salary or dividend. This gives you more control over your tax bill each year, which many investors find very useful. If you want to understand how this fits into a wider tax plan, our private client tax team can walk you through the options.
When you move a property into a limited company, the tax rules treat it as if you sold the property, even if no money changes hands. HMRC looks at the current market value of the property and bases the tax on that figure. This can come as a surprise to many landlords who assumed the move would be straightforward. The truth is that transferring property to a limited company can trigger more than one tax at the same time.
All of these can add up quickly. The upfront cost of moving property into a company is often significant, and it can take several years before the ongoing tax savings cancel it out.
According to HMRC’s guidance on tax when you sell property, the rules apply even where no sale price is agreed between the parties. It is important to model the numbers carefully before making any decisions. Our property tax specialists can help you work out the full picture before you commit.
Capital Gains Tax (CGT), is charged on the profit you make when something goes up in value. When you move a property into a limited company, HMRC treats it as if you sold it at today’s market price.
If that price is higher than what you paid, you have made a gain, and that gain is taxable. This is one of the highest costs to think about when transferring property to a limited company.
According to HMRC’s Capital Gains Tax guidance, the CGT rate on residential property for higher-rate taxpayers dropped to 24% from April 2024. Before that, it was 28%. You also get an annual CGT allowance, which is £3,000 for the 2026/27 tax year. The gain above that amount is what gets taxed. So if you bought a property for £200,000 and it is now worth £350,000, you have a gain of £150,000. After the £3,000 allowance, £147,000 would be taxable at your CGT rate.
There is a relief called incorporation relief that can push the CGT bill into the future. It works by delaying the tax until the company eventually sells the property. But it only applies if your property activities count as a genuine business, not just renting out a few flats. HMRC looks very carefully at these claims, and many buy-to-let landlords do not meet the conditions.
Getting this wrong can lead to a surprise tax charge, so it is worth speaking to a specialist. Our property tax team can review your situation and let you know if you qualify.
Yes, Stamp Duty Land Tax(SDLT), applies when you transfer property to a limited company. It does not matter that no money is being paid from one person to another. HMRC still charges SDLT based on the market value of the property at the time of the move. And because a company is buying the property, the 3% extra charge for additional properties also applies on top of the normal rates.
The numbers can get large very quickly. For a property worth £400,000, the SDLT bill, including the 3% surcharge, could be over £22,000. If the property still has a mortgage on it, SDLT can also apply to the amount owed on that mortgage if it is above the SDLT starting point. This catches a lot of landlords off guard. You can check the current SDLT thresholds and rates using the HMRC Stamp Duty Land Tax calculator to get an idea of what you might owe.
In some cases, yes. If the properties are held through a genuine property partnership before the transfer, there may be a way to move them into a company with little or no SDLT to pay. The rules around this are very specific, and the partnership structure has to be in place before the transfer happens. You cannot set it up at the last minute just to save tax. Our corporate business tax team can help you understand if this kind of structure could work for you.
There are a few ways to reduce the tax that comes up when transferring property to a limited company. Whether any of them apply depends on your situation, how you hold the properties now, and how much activity is involved in running them. The most talked about relief is called incorporation relief, but it is not available to everyone.
Incorporation relief lets you delay paying Capital Gains Tax when you move a business into a company. Instead of paying CGT now, it gets rolled into the value of the shares you get in return.
You only pay CGT later, when those shares are eventually sold. The catch is that your property activities have to qualify as a real business in HMRC’s eyes, not just a handful of rental properties. Many landlords with standard buy-to-let portfolios do not meet this test. HMRC and the courts have looked at this issue many times, and there is no simple answer.
Each of these comes with its own rules and conditions. Getting them wrong can cost more than not claiming them at all. According to HMRC’s guidance on business asset disposal relief, the conditions for business-related reliefs are tested carefully and must be met fully to apply. Our private client tax advisers can check what reliefs you may be able to use based on your own set of circumstances.
Once transferring property to a limited company is done, the way your rental income gets taxed changes. Instead of paying Income Tax on your profits, the company pays Corporation Tax.
For most landlords with larger portfolios, this works out cheaper each year. And unlike individuals, the company can deduct the full cost of mortgage interest before working out its taxable profit.
One of the most useful things about holding property in a company is that you get to choose when you take money out. Profits left inside the company are not taxed at your personal rate straight away. You only pay personal tax when you take a salary or a dividend.
This means you can keep money inside the business, grow your portfolio, and pay personal tax at a time that works best for you. For investors who do not need to live off their rental income every month, this is a real advantage.
When a company sells a property, it pays Corporation Tax on any gain rather than Capital Gains Tax. The company does not get the annual CGT allowance that individuals receive. However, it can use any capital losses to reduce gains on other properties it sells. For properties bought before January 2018, there may also be an indexation allowance available, which reduces the taxable gain.
To understand how capital allowances can work alongside property held in a company, it is worth speaking to a specialist who understands both areas. You can also find useful background through HMRC’s guidance on Corporation Tax to understand the basics of how companies are taxed.
The honest answer is that it depends. Transferring property to a limited company works well for some landlords and not at all for others. The decision comes down to how many properties you have, how much tax you currently pay, what you plan to do with the properties in the future, and how you want to take income out of the business.
There are also extra responsibilities that come with running a company. You need to file annual accounts with Companies House and submit a Corporation Tax return to HMRC each year.
According to HMRC’s Self Assessment guidance, company directors usually need to file a personal Self Assessment tax return too. These things take time and can cost money to manage. Our corporate business tax team can help you weigh up the full picture before you make any decisions.
Moving a property into a limited company is a big step, and the costs can catch people off guard if they go in without a plan. The good news is that with the right advice, you can understand exactly what to expect and make a decision that actually works for your situation.
ETC Tax helps landlords and property investors across the UK work through the numbers before making any moves. Our property tax and corporate business tax teams look at your full picture, not just one part of it. If you are a professional adviser looking for specialist support for your clients, our tax consultancy services are built for that too.
Get in touch with ETC Tax today and find out where you stand.
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