Incorporation relief is the rule in section 162 of the Taxation of Chargeable Gains Act 1992 that lets a landlord who transfers a property business as a going concern, with all its assets other than cash, to a company wholly or partly in exchange for shares, defer the capital gains tax the transfer would otherwise trigger at 18% or 24% (2026/27) by rolling the gain into the base cost of the shares (HMRC CG65700). The gain is taxed when the shares are sold. For transfers on or after 6 April 2026 the relief is no longer automatic: it must be claimed in the Self Assessment return for the year of transfer. Correct as at 7 October 2026.
What are the section 162 conditions?
All three conditions must be met: the business is transferred as a going concern, the whole of its assets (or all of them other than cash) go to the company, and the consideration is satisfied wholly or partly by an issue of shares (CG65710).
Going concern means the letting business carries on inside the company with the same tenancies. Whole of the assets means you cannot keep two houses back; cash is the only thing you may keep. Shares must actually be issued; there is no statutory time limit, but HMRC expects the issue fairly promptly once any reason for delay has gone (CG65720).
Does a buy-to-let portfolio count as a business?
HMRC's manual (CG65715) says business is not defined in the Act and takes its ordinary meaning, and applies the Upper Tribunal's tests from Ramsay v HMRC (2013): a serious undertaking earnestly pursued, and an occupation actively pursued with reasonable recognisable continuity.
HMRC's stated position is that relief will be available where the individual spends 20 hours or more a week personally undertaking the sort of activities that indicate a business, and that below that each case is considered on its own facts (CG65715). Tenancies, repairs, viewings and accounts done personally count; a portfolio run entirely through an agent, with a few hours a month, is a case CG65715 says must be considered carefully, and relief may not be available. Keep a time log and the correspondence from now.
Considering an existing portfolio transfer? Prepare for an incorporation review before comparing the costs and reliefs.
How is incorporation relief calculated?
The gain deferred is the whole gain multiplied by A divided by B, where A is the cost of the shares (the net value of the business transferred) and B is the total consideration received, and the deferred amount cannot exceed the cost of the shares (CG65740; section 162(4)).
Shares only: the whole gain is deferred and the base cost of the shares is the net value less the gain. Shares plus cash or a director's loan account: only the share proportion is deferred and the rest is taxed now, a loan account balance being consideration other than shares (CG65720). Mortgages the company takes over are not consideration (ESC D32, CG65745), but they reduce the net value and so the cost of the shares, capping the relief on a geared portfolio.
| What you receive | Gain deferred (2026/27) | Base cost of the shares | Taxed now |
|---|---|---|---|
| Shares only, net value above the gain | Whole gain (claim required) | Net value less the gain | Nothing |
| Shares plus cash or a loan account | Gain x shares / total consideration | Share value less the deferred gain | The balance less the £3,000 annual exempt amount (2026/27), at 18% or 24% |
| Shares only, mortgages leave a small net value | Capped at the cost of the shares (section 162(4)) | Nil or negligible | The excess over the cap |
| Transfer before 6 April 2026 | Automatic; election to disapply under section 162A | As above | As above |
| Transfer on or after 6 April 2026 | Claim in the return by the first anniversary of the 31 January after the tax year (2026/27 transfer: 31 January 2029); no election | As above | As above |
Sources: CG65740, CG65745, CG65735 and helpsheet HS276 (2025 to 2026).
Is incorporation relief still available in 2026, and what are the new rules?
Yes, but for transfers on or after 6 April 2026 it must be claimed in your Self Assessment return for the year of transfer, by the first anniversary of the 31 January following that tax year, so a transfer in 2026/27 must be claimed by 31 January 2029 (CG65735; GOV.UK policy paper, 26 November 2025).
The section 162A election to disapply the relief is repealed for those transfers; a landlord who would rather pay the tax now does not claim.
What is the stamp duty position when you transfer property to your own company?
Incorporation relief does nothing for stamp duty land tax. A transfer to a company you are connected with is charged on market value, and a company pays the additional-property rates of 5% to 17% (from 1 April 2025) on any residential property of £40,000 or more. Where a dwelling costs more than £500,000 the 17% rate for corporate bodies may apply instead, with relief available where the property is used in a property rental business. Transfers between the same seller and buyer are linked transactions, charged on their combined value, and the return and payment are due within 14 days of completion.
What is the partnership route, and why does HMRC look at it?
Where a property business is carried on by a genuine partnership, Schedule 15 of the Finance Act 2003 replaces the market value rule with a chargeable consideration based on the sum of the lower proportions, which can lower the SDLT on a transfer to the partners' own company (SDLTM34160).
HMRC's Partnership Manual (PM273400) says it is aware of partnerships being used for SDLT avoidance and that section 75A of the Finance Act 2003 has applied to such arrangements since 24 March 2010. A partnership has to have existed and carried on the business, with its own accounts and return, before Schedule 15 is a question.
Example
Example. A higher-rate taxpayer runs three let houses in her own name, worth £400,000 each (£1,200,000), bought for £700,000 in total, with £600,000 of mortgages, and spends over 20 hours a week on them. The 2026/27 transfer gives a gain of £500,000.
No relief: £500,000 less the £3,000 annual exempt amount (2026/27) is £497,000, at 24% is £119,280, reportable and payable within 60 days of completion.
Relief claimed, shares only: the net value of the business is £1,200,000 less £600,000 of mortgages, so the shares cost £600,000 (CG65740). Deferred gain: £500,000 times £600,000 divided by £600,000 is £500,000. Base cost of the shares: £100,000. Tax now: nil, provided the claim is made in the 2026/27 return.
Loan-account variation: she takes £100,000 as a director's loan account credit and shares of £500,000. Deferred: £500,000 times £500,000 divided by £600,000 is £416,667 (rounded to the pound). Chargeable now: £83,333 less £3,000 is £80,333, at 24% is £19,279.92.
SDLT is unaffected by the relief, and the three transfers are linked, so the company pays on the £1,200,000 total: £123,750 (5% of £125,000, 7% of the next £125,000, 10% of the next £675,000 and 15% of the last £275,000). The relief has moved £119,280 of tax from now to a later sale of the shares; it has not removed it.
Which incorporation schemes is HMRC challenging?
HMRC has published two Spotlights (63, updated May 2025, and 63a, April 2026) on hybrid arrangements in which landlords move properties into an LLP with a corporate member; its stated view is that the scheme does not work.
HMRC's reasons: the LLP is transparent for CGT under section 59A, so the landlords still own their share of the properties and the base cost is unchanged; paragraphs 10 and 14 of Schedule 15 mean SDLT applies on the transfer and when profit shares change; and users may have to pay more than the tax they tried to avoid, plus interest and penalties. A section 162 incorporation of a real business, with SDLT paid and a claim in the return, is not what the Spotlights describe.
What to do now
Three numbers decide the question: the CGT without relief, the SDLT on market value at the additional-property rates, and the cost of refinancing the mortgages into the company. You can list each property with its cost and mortgage, run the personal side through our landlord tax calculator and the disposal side through our CGT property calculator.
The business test, the consideration structure, the claim and any partnership question are tax planning work for an adviser. The wider decision is covered in whether to incorporate a property portfolio and in company versus personal ownership and Section 24.
What we do on an incorporation file
We first test whether the portfolio is a business in HMRC's terms, against the Ramsay factors and the 20-hour line in CG65715. We ask for the property schedule, the last two years' rental accounts, and who does the work, hours a week included.
The three costs are then modelled together, CGT with and without the relief, SDLT on market value and the refinance cost, over the years you expect to hold. We structure the consideration and prepare the claim in the Self Assessment return. Where a partnership already exists we look at whether Schedule 15 applies on the facts; where none exists we will not create one for the transfer.
If the numbers show incorporation is not worth it, or the portfolio does not meet the business test, we say so; if we cannot help we will say that too.
Frequently Asked Questions
It is the section 162 rule that defers the capital gains tax on transferring a property business to a company in exchange for shares, by reducing the base cost of the shares by the gain.
For transfers on or after 6 April 2026 the relief must be claimed in the Self Assessment return for the year of transfer, by the first anniversary of the 31 January after that tax year (31 January 2029 for 2026/27), and the section 162A election to disapply it is repealed (GOV.UK policy paper, 26 November 2025).
In the Self Assessment return for the year of transfer, with brief details of the transaction, the tax computations and the type of business transferred (GOV.UK policy paper, 26 November 2025), uploaded as an attachment to a digital return or in box 54 of a paper SA108 (CG65735). For a 2026/27 transfer the claim must be in by 31 January 2029.
No. SDLT is charged on the market value of the property at the additional-property rates (5% to 17% from 1 April 2025), and the return and payment are due within 14 days of completion. Where a dwelling costs more than £500,000 the 17% rate for corporate bodies may apply instead, with relief available where the property is used in a property rental business.
Talk to Umer Khan about incorporating a property business
Bring the property schedule, the rental accounts and a record of your hours; the first conversation is about whether the portfolio passes the business test. Umer Khan, Senior Manager, works on the firm's property tax files. Call 020 8554 2135, email info@visionconsulting.co.uk or use the contact page.
About Vision Consulting. Vision Consulting is a firm of chartered accountants and registered auditors, regulated by ICAEW, with offices in the City of London (the Gherkin, 30 St Mary Axe), the West End (33 Cavendish Square) and Gants Hill, Ilford. The firm provides year-end accounts, bookkeeping, payroll and tax compliance, including Making Tax Digital and VAT, for individuals, landlords, directors and businesses. Its specialist teams provide audit and assurance (company and charity audits and audit-exemption advice), probate and estate administration (the firm is licensed for non-contentious probate), inheritance-tax and estate planning, HMRC tax investigations and voluntary disclosures, property and landlord taxation, and corporation-tax and company advisory.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances. Speak to us before acting on anything here.