Should I transfer my rental property to a company?
Should I transfer my rental property to company is a question we are asked time and time again. We asked across the RPGCC team and we asked them to tell us about the tax pros and cons.
At RPGCC, we’re proud to be recognised as one of London’s leading accountancy firms for landlords, developers, and property investors. A large proportion of our client base operates across the UK rental property market in various forms—ranging from individual buy-to-let owners to complex multi-property portfolios held in corporate structures.
One of the most frequent questions we receive is: “Should I incorporate my property portfolio?” It’s a question that’s become even more relevant considering recent tax changes, interest rate hikes, and evolving HMRC guidance. While incorporation can offer tax efficiencies, it also comes with a host of potential pitfalls. Here’s what you need to know.
Why are landlords with rental property still talking about incorporation?
Interest in transferring personally owned rental properties into companies—often called “incorporating”—has grown significantly over the last decade. It started with the government phasing out full tax relief on mortgage interest for individual landlords in 2015, gradually replacing it with a 20% basic rate credit. This dramatically increased effective tax rates for many higher-rate taxpayers, sometimes pushing landlords into negative cash flow after tax.
For many, using a limited company became an attractive alternative. Companies can deduct 100% of mortgage interest as a business expense, and the corporation tax rate (now 25% for large and investment companies) still compares favourably to income tax rates of up to 45%.
“Landlords with substantial borrowings or who plan to reinvest profits rather than extract them personally can often benefit from the corporate route,” says Tim Humphries, Tax Partner at RPGCC. Wes Mason, RPGCC’s property portfolio expert added “incorporation isn’t a magic bullet—there are CGT, SDLT, conveyancing/transfer charges and long-term planning issues to weigh up. It isn’t always right and isn’t for everyone.”
The key question: Does incorporation make sense for you and your investments?
Every landlord’s situation is different. Incorporation is most effective when:
- The portfolio is highly leveraged
- Profits will stay within the company
- There’s a long-term investment strategy in place
However, extracting funds from a company comes with its own tax consequences, and for those looking to exit in the short term, the benefits can diminish.
“In some cases, landlords find that incorporation yields limited real savings,” says Wes. “We’ve seen cases where after factoring in CGT, SDLT, and dividend tax, incorporation was far more hassle than it was worth and the payback period comparing initial costs against annual savings stretched over many years.”
Transferring rental property to a company: Tax isn’t optional
Contrary to popular belief, transferring a property from personal to company ownership is not a tax-free event. Unless you qualify for any reliefs (which are not always easy), HMRC treats this as if you sold the property at market value.
That means two potential liabilities:
- Capital Gains Tax (CGT) on any increase in value since original acquisition
- Stamp Duty Land Tax (SDLT) payable by the company on acquisition
What is incorporation relief, and can you claim it?
Incorporation Relief allows you to defer CGT if you’re genuinely transferring a business into a company in exchange for shares. That’s a crucial distinction—simply moving assets into a company for a director’s loan doesn’t qualify.
HMRC typically wants to see that you’re running a property business, not just owning investment assets. Their guidance mentions a rough benchmark of 20+ hours per week of active involvement.
If you do qualify, you must accept shares in exchange for the property—not cash or a director’s loan balance. This means that any equity in the properties will be trapped in the value of the company shares and would be subject to Income Tax if extracted from the company.
“We’ve encountered situations where landlords made costly assumptions, transferring property without understanding the CGT implications,” notes Humphries. “It’s critical to structure this properly from the outset.”
The role of partnerships in reducing SDLT
One way to potentially mitigate SDLT is to transfer property via a partnership, which is treated differently for SDLT purposes—provided the new company is owned by the same partners.
However, forming a partnership purely for this purpose has its risks. Anti-avoidance rules and HMRC scrutiny are high. Even informal or joint ownership arrangements may not qualify unless the partnership can be proven to exist as a business in common with a view to profit.
Filing papers as a partnership on its own does not always work, you need to back this up with documentation and clear and distinct mutual involvement. Wes added “It is really important to note that partnership status is not something you can do retrospectively with a few documents, HMRC will look at the real substance of how the properties were managed.”
Should I transfer my rental property to a company?
Our final word is, seek advice from property experts!
Incorporating your property portfolio can be a smart move—but only under the right circumstances. We regularly hear from people that have taken property investment, and incorporation advice, from property experts on TikTok, and now they need help to unravel the mess, which comes at considerable expense! Please don’t use TikTok or any other social media to replace qualified professional advice!
At RPGCC, our team specialises in navigating the complex tax issues unique to landlords and property investors. We help clients weigh up the short-term costs and long-term benefits, taking into account CGT, SDLT, income extraction, and succession planning.
“Don’t base a major decision like this on something you overheard in a bar, at a networking event or even worse, your brother watched on TikTok!!,” says Tim Humphries. “We’re here to help you do it right—from start to finish.”
If you’re thinking about incorporation, or simply want to understand your options better, get in touch with one of RPGCC’s property tax specialists today. We’ll give you clear, personalised advice.
