Guide · 10 min read
How Section 162 TCGA incorporation relief defers CGT when a property business incorporates, the Ramsay genuine business test, and what it does not do about SDLT.
Written by Matt Lenzie · Published 10 June 2026
Advice from
Matt Lenzie · 25+ year career banker (Bank of Scotland, Lloyds Banking Group). £300m+ raised for property clients.
25+ year career banker (Bank of Scotland, Lloyds Banking Group). £300m+ raised for property clients.
Incorporation relief is a capital gains tax deferral, under Section 162 of the Taxation of Chargeable Gains Act 1992, that lets a landlord transfer a property business into a limited company without paying CGT at the point of transfer, by rolling the gain into the base cost of the shares received. It is the relief that makes incorporating an existing portfolio viable for some landlords, and its strict conditions are what make the same move uneconomic for most others.
We arrange the mortgage leg of portfolio incorporations, the refinancing of personal-name loans onto company terms, so we see where the tax planning meets lending reality. This guide covers what the relief does, who qualifies, what it does not cover, and the questions to settle before anything is signed. It is general guidance, not tax advice: an incorporation should never proceed without a specialist accountant modelling your numbers.
Transferring a property you own personally into your own company is a disposal at market value, exactly as if you had sold to a stranger. Without relief, the accrued gain since you bought is taxed at residential CGT rates of 18% or 24%, payable on a sale that generated no cash to pay it with. On a portfolio bought decades ago, that bill alone kills the project.
Section 162 changes the timing. The gain is not charged on the transfer; instead it is deducted from the base cost of the shares you receive, so the tax surfaces only if and when you sell the company. Hold the shares for life and the gain may never be charged at all, since base costs reset on death. The relief applies automatically when the conditions are met; no claim is needed, though you can elect to disapply it.
Four, and each is a tripwire in practice. The transfer must be of a business (the contested condition, covered next), it must go across as a going concern, it must include the whole of the business's assets (cash can be excluded, but cherry-picking properties cannot, transferring three of seven and keeping four risks the relief on all of it), and the consideration must be wholly or partly shares in the company. Where part of the price is taken as cash or left as a loan account rather than shares, the relief is proportionately restricted, which is exactly the trade-off to model: a director's loan account is valuable for tax-free extraction later, but every pound of it dilutes the CGT deferral now. Where the balance falls is a modelling exercise for your accountant, not a default.
This is the gate, and most landlords do not get through it. Passive ownership, a property or two, an agent collecting rent, is investment, not a business, and investment does not qualify. The leading authority, the Upper Tribunal's decision in Ramsay v HMRC (2013), allowed relief for a landlord spending around 20 hours a week actively managing a block: maintenance, gardens, administration, tenant matters, conducted seriously and personally.
From that case and HMRC practice, the indicators that support business status:
None of this is mechanical, and HMRC will not give advance clearance on whether a property business exists. Landlords with full-time jobs and fully managed portfolios sit on the wrong side of the line more often than incorporation promoters suggest, and a failed claim surfaces years later with the CGT, interest and possibly penalties attached. This is the single point on which paid, specialist advice is non-negotiable.
No. Section 162 defers capital gains tax only. The company acquiring the portfolio pays stamp duty land tax (or LBTT in Scotland, LTT in Wales) on the market value of what it receives, including the additional-dwelling surcharge, and on a multi-property transfer that is a substantial cheque. Multiple dwellings relief, which once softened it, was abolished in June 2024; the sting can be reduced where six or more dwellings transfer together and non-residential rates apply.
A separate SDLT relief exists for property held in a genuine partnership (including some husband-and-wife LLPs) incorporating, but HMRC scrutinises partnerships assembled shortly before incorporation precisely to capture it. Schemes marketed around manufactured partnerships have a poor record; treat them with caution and take advice from an adviser who will still be there if HMRC asks questions.
Budget honestly, the realistic cost stack for an incorporation is: SDLT on the portfolio, legal and valuation fees, early repayment charges on existing personal mortgages, and the new lending costs, with CGT deferred only if Section 162 genuinely applies.
The tax analysis usually arrives at our desk finished; the financing rarely does. Personal buy-to-let mortgages cannot simply be relabelled: the company is a new borrower, so every mortgaged property in the transfer needs a new limited company buy-to-let mortgage, with the proceeds redeeming the personal loans on completion. Points that decide timing and cost:
The honest framework: incorporation pays when the annual savings inside the company, full mortgage interest deductibility against Section 24, corporation tax at 19% to 25% versus income tax at 40% or 45%, retained profit compounding toward the next purchase, are large enough to repay the upfront SDLT, refinancing and advice costs within a horizon you believe in, and when Section 162 genuinely shelters the CGT. It tends to stack up for heavily leveraged higher-rate landlords with sizeable, actively managed portfolios and a long hold ahead; it tends to fail for small, low-geared or fully delegated portfolios, where buying future properties through a company and leaving the existing ones alone is the better answer.
Start with the full cost-benefit on our transfer property to a limited company page, model the ongoing position with the limited company vs personal calculator, and read the companion guide to limited company buy-to-let tax for what life looks like after the move. Then assemble the pair every incorporation needs: a specialist property tax accountant for the Section 162 and SDLT analysis, and a broker, us, to price and sequence the refinancing. The first conversation is fee-free, and candidly, some end with "keep the portfolio personal", which is the advice working as intended.
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