Incorporating a Property Portfolio: The 2026 Tax Guide

Incorporating a property portfolio can cut the tax on rental profits, because a limited company deducts full mortgage interest and pays corporation tax at 19–25% rather than facing Section 24's restricted relief. But the transfer itself can trigger Stamp Duty Land Tax and Capital Gains Tax, so the tax of incorporating a property portfolio only stacks up for some landlords.

Key takeaways

• Section 24 is the main driver. Individual landlords no longer deduct mortgage interest from profit — they get only a 20% basic-rate credit — while a company deducts interest in full.
• Companies pay corporation tax, not income tax. Rental profit is taxed at 19% up to £50,000 and 25% above £250,000, with marginal relief between, versus up to 45% personally.
• Incorporation is a taxable event. Transferring property to your own company can trigger Stamp Duty Land Tax and Capital Gains Tax, even though it is a paper transfer to a connected party.
• Reliefs may soften the cost. Section 162 incorporation relief can defer the CGT where a genuine property business is transferred; a partnership route may reduce SDLT — but both have strict conditions.
• Model it first. Use our UK calculators and the rental income calculator to compare personal and corporate outcomes before committing.

Why landlords are considering incorporation: the Section 24 driver

Since 2020/21, Section 24 has stopped unincorporated residential landlords deducting mortgage and finance costs from rental profit. Instead you pay tax on profit before interest, and receive a tax reduction worth just 20% of your finance costs. For higher-rate and additional-rate taxpayers that is a real cost: income is taxed at 40% or 45% while relief is capped at 20%. HMRC explains the mechanics, with worked case studies, in its guidance for residential landlords.

A limited company sits entirely outside Section 24. It deducts mortgage interest as an ordinary business expense, then pays corporation tax on what is left. For a heavily-geared, higher-rate landlord, that difference alone can be worth thousands a year — which is why incorporation has become one of the most common questions we field from portfolio landlords.

Is incorporating a property portfolio tax-efficient?

On an ongoing basis, often yes. Inside a company, rental profits are charged to corporation tax at 19% on profits up to £50,000 and 25% on profits from £250,000, with marginal relief tapering the rate between those points. Compared with personal income tax of up to 45% — inflated further by the Section 24 add-back — the corporate rate is materially lower, and full interest relief is restored.

The catch is that money inside the company is not yet in your pocket. To spend rental profits personally you must extract them, usually as dividends, which are taxed again at the 2026/27 dividend rates of 10.75%, 35.75% and 39.35% above a £500 allowance. Landlords who reinvest profits to grow the portfolio benefit most; those who need every pound of rent to live on see the advantage shrink once this second layer of tax is counted.

What tax do you pay when you transfer property to a company?

Moving property from your own name into your own company is not free. Because you and the company are connected, HMRC treats the transfer as happening at market value, which creates two upfront charges to consider:

• Capital Gains Tax. You are deemed to dispose of each property at today's value. Any gain over your original cost is chargeable, and residential-property gains are taxed at higher CGT rates than other assets. Depending on the built-up gains across the portfolio, this can be a substantial bill in the year of transfer.
• Stamp Duty Land Tax. The company is deemed to buy the property at market value and pays SDLT accordingly. The higher rates for additional dwellings normally apply to a company purchase, so the surcharge bites even though no third-party sale has taken place. GOV.UK sets out how Stamp Duty Land Tax is charged.

These are the two costs that most often make incorporation uneconomic for smaller or low-gain portfolios. They must be weighed against years of future income tax savings — a payback calculation, not a one-off win.

When does incorporation relief (s162) apply?

The CGT charge is not always payable now. Section 162 TCGA 1992 incorporation relief can defer the gain where a business is transferred to a company wholly or partly in exchange for shares: the gain is rolled into the base cost of those shares instead of being taxed immediately. GOV.UK summarises the conditions on its Incorporation Relief page.

The crucial word is business. Simply owning a rental property or two is not automatically a business — HMRC often argues that passive letting is an investment, not a trade-like business. To qualify, the letting activity generally needs a sufficient degree of active, regular involvement (managing multiple properties, significant time commitment). Portfolios run through a genuine partnership are more likely to meet the test, and a partnership route can also help with SDLT. But these positions are fact-specific and frequently challenged, so they should never be assumed — a licensed chartered accountant should confirm eligibility before any transfer.

A worked consideration: does the maths stack up?

Imagine a higher-rate landlord with a mortgaged portfolio generating £60,000 of rent, £30,000 of mortgage interest and £10,000 of other costs — a real profit of £20,000.

• Held personally: the £30,000 interest is added back, so £50,000 is taxed at higher rates, then reduced by a 20% credit on the interest (£6,000). The effective tax is far higher than 40% of the true £20,000 profit — the classic Section 24 squeeze.
• Held in a company: the full £30,000 interest is deductible, leaving £20,000 taxed at 19% corporation tax — around £3,800 — with the rest retained to reinvest or extract later.

The ongoing saving is clear. The question is whether it outweighs the CGT and SDLT triggered on transfer, plus refinancing costs and ongoing company running costs. For a landlord planning to hold and grow for a decade, it frequently does; for one planning to sell within a few years, it often does not. This is exactly the kind of comparison our rental income calculator is built to stress-test.

Mortgages and refinancing: the practical hurdle

Tax is only half the decision. Personal buy-to-let mortgages cannot be transferred to a company, so incorporation usually means redeeming existing loans and taking out new limited-company (SPV) mortgages. Company products can carry higher interest rates, larger arrangement fees and personal guarantees, and your existing loans may attract early-repayment charges. In some cases higher borrowing costs erode much of the Section 24 saving, so refinancing terms must be confirmed before, not after, the decision is made.

When incorporating a property portfolio does and doesn't make sense

Incorporation tends to make sense when you are a higher- or additional-rate taxpayer, hold a sizeable and heavily-mortgaged portfolio, plan to keep and reinvest profits, and can access company finance on workable terms — and where s162 relief can defer the CGT on transfer. It tends not to make sense for basic-rate landlords, small or unmortgaged portfolios, short holding horizons, or where the upfront SDLT and CGT simply outweigh future savings.

There is no universal answer — only your numbers. Every position we prepare is reviewed and signed off by a licensed chartered accountant before anything is filed. To see how the current rules affect your own income, our guide to Self Assessment for landlords walks through the return, our companion piece on the 2026 furnished holiday lettings changes covers a related shift, and you can model both routes with our calculators. When you are ready for tailored advice, book a consultation.

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Reviewed by a Chartered Accountant. Figures reflect England and Northern Ireland rules for the 2026/27 tax year; Scotland and Wales differ for some taxes. This article is general information, not personal tax advice — confirm your position with a qualified professional before acting.

Last updated: 5 August 2026

Frequently asked questions

Is incorporating a property portfolio worth it for tax?

It depends on your marginal rate, gearing and time horizon. Higher-rate landlords with large mortgages hit hardest by Section 24 gain most, because a company deducts full interest and pays 19–25% corporation tax. But Stamp Duty Land Tax and Capital Gains Tax on the transfer can outweigh the saving for smaller or lightly-mortgaged portfolios, so the numbers must be modelled individually.

Do you pay Stamp Duty Land Tax when transferring property to a company?

Usually yes. A transfer of residential property to a connected company is treated as a sale at market value for SDLT, and the higher rates for additional dwellings normally apply — even if no cash changes hands. A narrow relief can apply where a genuine partnership incorporates, but the conditions are strict and must be confirmed in advance by a qualified adviser.

What is incorporation relief under section 162?

Section 162 TCGA 1992 lets you defer the Capital Gains Tax that would otherwise arise on transferring a business to a company in exchange for shares. The gain is rolled into the base cost of those shares rather than paid now. It only applies where the letting activity amounts to a genuine business, which for property depends on the degree of active involvement — a point HMRC frequently challenges.

Can a limited company still deduct mortgage interest?

Yes. Section 24 only restricts finance-cost relief for individuals and partnerships. A company deducts mortgage interest in full as a business expense before paying corporation tax, which is the main tax attraction of holding buy-to-let property through a company.

Will I have to refinance my mortgages if I incorporate?

Almost always. Personal buy-to-let mortgages cannot simply be assigned to a company, so you generally need new limited-company (SPV) borrowing. Company mortgage products often carry higher rates and arrangement fees, and there may be early-repayment charges on your existing loans — costs that must be built into any incorporation decision.

How is profit taxed inside a property company when I take it out?

The company pays corporation tax at 19% up to £50,000 of profit and 25% above £250,000, with marginal relief between. Extracting profit as dividends is then taxed personally at the 2026/27 dividend rates of 10.75%, 35.75% and 39.35% (up from 8.75/33.75/39.35% from 6 April 2026), after a £500 dividend allowance. This second layer of tax must be weighed against the corporate saving.