From 6 April 2027, rental profits held personally will be taxed at new, higher property income rates, while company profits will not. This landlord incorporation guide runs the arithmetic both ways, weighs the reliefs that make or break a transfer, and shows how to make the numbers work for you, not against you.
Why the company question is back
The sequence is familiar to anyone who has held rental property since 2015: the 3 per cent, now 5 per cent, stamp duty surcharge; the Section 24 restriction of mortgage interest relief to a basic-rate credit; the loss of the wear-and-tear allowance; frozen thresholds pulling rents into higher bands. The Autumn Budget 2025 added the capstone. From 6 April 2027, under the Finance Act 2026, property income in England, Wales and Northern Ireland will be taxed at its own rates of 22 per cent basic, 42 per cent higher and 47 per cent additional, two points above the equivalent income tax rates, with the Section 24 credit rising to 22 per cent in step and the personal allowance applied to earned income first. HMRC projects around 2.4 million landlords will pay more. Company landlords are untouched: rental profit inside a company pays corporation tax at 19 to 25 per cent, and the new property rates simply do not apply.
Hence the question, which splits into two quite different problems. Buying the next property through a company is cheap and administratively simple, which is why a clear majority of new buy-to-let purchases now complete inside one, a shift PPI has tracked as landlords go corporate in record numbers. Moving an existing personally held portfolio in is another matter entirely.
What a limited company actually changes
The company is not a tax dodge but a different tax system: better on interest and retention, worse on extraction and administration. Three differences do nearly all the work. First, interest: a company deducts mortgage interest in full before calculating taxable profit, where a personal landlord gets only a basic-rate credit; on a geared portfolio this alone can swing the annual outcome by thousands. Second, rates: corporation tax at 19 per cent on profits under £50,000, rising through marginal relief to 25 per cent above £250,000, compares with personal marginal rates that from April 2027 reach 42 and 47 per cent on rental profit. Third, retention: profit kept inside the company to fund the next deposit suffers only corporation tax, which makes the company a compounding machine for the investor who is building rather than spending.
Now the other side of the ledger. Money taken out of the company is taxed again, as salary or dividends, and dividend rates rose a further two points from April 2026; a landlord who needs the rent to live on can find the combined company-plus-dividend burden little better, and sometimes worse, than personal rates. Accounts must be filed, an accountant retained, typically several hundred to over a thousand pounds a year, and company ownership forfeits the personal CGT annual exemption. PPI’s guide to the sole trader versus limited company decision covers the structural basics; the honest summary is that the company favours higher-rate taxpayers, geared portfolios and reinvestors, while personal ownership still suits basic-rate taxpayers, low gearing and those spending the income.
The incorporation arithmetic, both ways
Take a higher-rate taxpayer with £20,000 of rent and £8,000 of mortgage interest on personally held property. From April 2027 the rent is taxed at 42 per cent, £8,400, less a 22 per cent credit on the interest, £1,760, leaving £6,640 of tax and £5,360 in hand from £12,000 of true profit: an effective rate above 55 per cent on the economic profit. Inside a company, the same figures produce £12,000 of taxable profit after full interest deduction and £2,280 of corporation tax at 19 per cent, leaving £9,720.
If every pound is retained for the next deposit, the company wins by more than £4,000 a year on this small example, and the gap scales with gearing and with rate rises. If every pound is extracted as dividends, dividend tax claws back a large share of the advantage; the break-even depends on your other income, which is precisely why the generic internet answer is worthless. These are illustrations at the announced April 2027 property income rates and 19 per cent corporation tax; your figures will differ, and extraction changes the outcome materially. Run your own portfolio through this frame before the accountant does; the answer usually announces itself.
The move itself is a disposal
Transferring an existing portfolio to your own company is the second sum. In HMRC’s eyes the transfer is a market-value disposal: capital gains tax at 18 or 24 per cent on the whole accrued gain, with a £3,000 annual exempt amount and 60-day reporting, and stamp duty with the 5 per cent surcharge on the whole current value, payable in cash against no sale proceeds. A company pays that surcharge on every residential purchase from the first pound upwards, and a flat 17 per cent applies above £500,000 in certain cases.
Two reliefs can neutralise these charges, and both are conditional. Incorporation relief rolls the gain into the company shares, but requires the portfolio to be a genuine business, transferred whole. SDLT partnership relief can eliminate the duty where a genuine partnership, not merely joint ownership, has run the business. Landlords who qualify for both can incorporate at little tax cost; landlords who qualify for neither face a bill that can exceed the tax saving of a decade. Establishing which you are is the entire job, and this is the one decision where the accountant’s fee is not optional.
The reliefs, and their small print
Section 162 incorporation relief defers the capital gain by rolling it into the base cost of the shares you receive, provided the whole business is transferred as a going concern in exchange for shares. The contested word is business. The leading authority accepted a couple who spent substantial time each week actively managing their portfolio; HMRC resists claims where a handful of properties are fully delegated to agents. There is no statutory bright line, no clearance procedure for the business question, and the relief is examined after the event, which is why advisers document management activity for a year or more before transferring. Note also what deferral means: the gain has not vanished but moved into the shares, resurfacing when the company or its shares are eventually sold, while the company’s own base cost in the properties resets to market value.
On stamp duty there is no general incorporation relief; the company pays on market value with the surcharge unless the transfer comes from a genuine partnership, where the sum-of-lower-proportions rules can reduce the charge to nil for connected partners. A partnership means a real business carried on in common with a view to profit, evidenced over time by a partnership agreement, its own bank account, filed partnership returns and genuine joint management. A married couple who merely co-own and split the rent do not qualify, and schemes that manufacture a partnership shortly before incorporating attract HMRC’s specific attention. If your affairs genuinely look like a business, the reliefs were written for you; if they must be dressed up to look like one, the costume is the risk.
Lending to the company landlord
Company lending is now mainstream, the mortgage market having followed the tax incentives, but it is not identical. A new-purchase company mortgage is straightforward: a special purpose vehicle with the right registered activity codes, directors’ personal guarantees, and rates typically a little above the equivalent personal product, though the gap has narrowed as volume has grown and some lenders now price the two identically. Pricing direction matters here too, as PPI reported when Barclays cut mortgage rates towards 3.5 per cent in early 2026.
Interest coverage is generally stressed at 125 per cent for a company against 145 per cent for a higher-rate personal borrower, which means a company can often borrow more against the same rent: an underappreciated point for investors in lower-yielding stock. Maximum loan-to-value is 75 per cent with the mainstream panel, higher with specialists at a price, and fee structures lean towards percentage arrangement fees, which suit smaller loans better than flat fees do.
An incorporation refinances every loan at once
Incorporating an existing portfolio is where financing gets expensive, because a transfer to the company is a sale: every mortgage must be redeemed and rewritten in the company’s name, crystallising early repayment charges on fixed rates, new arrangement fees, new valuations and new legal work across the whole portfolio simultaneously. The disciplined route is to phase the incorporation around fixed-rate maturities, moving properties as their ERCs expire, though this complicates the Section 162 requirement to transfer the business as a whole and therefore needs advice on sequencing. Some landlords instead incorporate in one event timed to the largest maturities and absorb the balance of charges. Either way, the refinancing bill belongs in the incorporation arithmetic alongside CGT and SDLT, and a broker who can place a multi-property portfolio application with one lender will save both money and months.
The investor’s playbook
Strip the noise away and the decision is three questions. What do the two regimes cost you annually, at your marginal rates, on your gearing, given how much profit you extract? What would moving cost you once, in CGT, SDLT and refinancing, given which reliefs you genuinely qualify for? And how long will you hold, since the annual saving must repay the one-off cost within your investment horizon? The April 2027 rate change sharpens the first question without changing the method, and it puts a date on procrastination.
The guide’s decision checklist is worth keeping to hand:
- Before deciding: compute the accrued gain and current value per property; establish whether your involvement plausibly constitutes a business; check every mortgage’s consent and ERC position; and model retained versus extracted profit at your own marginal rates.
- If proceeding: take written advice on Section 162 and SDLT before any transfer; evidence partnership or business activity in advance, not retrospectively; refinance costs into the plan; and complete well before 6 April 2027 if the new rates are the trigger.
Two habits of the seasoned incorporator stand out: keep the SPV clean, property only, no trading sidelines; and walk away from any scheme whose promoter is more certain than the legislation.
Hybrids, succession and the exit
The company changes the exit, which deserves equal thought. A personal landlord sells properties and pays CGT once; a company landlord either sells properties inside the company, paying corporation tax on gains and then dividend tax on extraction, or sells the company’s shares, which buyers may discount for latent gains but which can suit a whole-portfolio disposal. Company ownership also forfeits the prospect of no CGT rebasing on death that personal holders’ estates may use.
Succession is where companies quietly excel: shares can be gifted incrementally, structured into growth and freezer classes, and planned around inheritance tax in ways a schedule of houses cannot, which is why incorporation is often really an estate-planning decision wearing an income tax disguise. And a hybrid portfolio, with new purchases in the company and legacy property held personally, should be treated as acceptable, and often optimal, rather than untidy, provided you accept two tax regimes to administer indefinitely. Buy new property in the structure the sums support today, not the one chosen in 2015, and run the sum annually: circumstances change and so does the answer.
The bigger picture
The direction of policy could hardly be clearer. Separate property income rates from April 2027 formalise the principle that rental income is to be taxed more heavily than wages; Making Tax Digital drags landlord reporting onto a quarterly business footing from April 2026 for incomes over £50,000, extending to £30,000 from 2027 and £20,000 from 2028; the Renters’ Rights Act professionalises the operating side; and the PRS database will shortly make compliance histories public. Every one of these measures narrows the space in which the informal, personally taxed hobby landlord can prosper, and each nudges the sector towards corporate or quasi-corporate operation.
Nothing announced changes company taxation of rental profit, and the political economy of doing so, when the government wants institutional investment in rental housing, argues for stability there, though nothing in tax is permanent and the incorporated should stay alert to Budgets too. The company is a tool, not a destination; the seasoned investor chooses it, or declines it, on arithmetic they have run themselves. Whatever you choose, choose it deliberately, on advice, before April 2027 makes the default choice for you.
