Is incorporating your property portfolio worth it? A worked example

Incorporating a buy-to-let portfolio is the most talked-about answer to Section 24. Sometimes it is the right answer. Often it isn't, or not yet. The only reliable way to find out is to put numbers on it: the one-off cost of moving the properties, the yearly tax saving, and how long it takes for one to pay for the other.

This article works through an illustration step by step. The figures are invented to show the method. They are not a client case, and your answer will depend on your own portfolio.

The illustrative landlord

• Owns six houses personally, each worth £300,000, so £1.8m in total.
• Bought them for £1.0m in total, including costs.
• Mortgages of £900,000 at 5%, so £45,000 of interest a year.
• Rent of £110,000 and running costs of £20,000, so £90,000 profit before interest.
• No other income. Spends more than 20 hours a week running the portfolio.
• Lives in England. Figures use 2027/28 rates, when the new property income rates apply.

Step 1: the one-off costs

Capital gains tax

Moving properties to a company you control is a disposal at market value. The gain here is £800,000 (£1.8m less £1.0m). After the £3,000 annual exempt amount, at 24%, that's roughly £191,000 of CGT if no relief applies.

Incorporation relief under section 162 TCGA 1992 can defer the whole gain where a business is transferred as a going concern, with all its assets (other than cash), in exchange for shares. Under an HMRC concession, the company taking over the business mortgages doesn't count as consideration. The gain is deducted from the base cost of your new shares instead.

Two points matter now:

• "Business" means more than passive investment. HMRC applies the Ramsay tests and generally accepts relief where the owner spends 20 hours or more a week on the letting activities. Below that, it's case by case.
• Relief must now be claimed. For transfers on or after 6 April 2026 it is no longer automatic. See our article on the new claim.

SDLT

SDLT is charged on market value because you and the company are connected (FA 2003 s53). The mortgages don't reduce the market value rule. With multiple dwellings relief abolished from 1 June 2024, there are two broad outcomes for our six houses:

We assume the non-residential basis, £79,500, applies. A genuine property partnership can sometimes reduce SDLT further under Schedule 15 to the Finance Act 2003, but HMRC scrutinises these arrangements closely and the facts must support them. See partnership incorporation.

Other costs

Add legal fees, valuations, refinancing costs, any early repayment charges and our own advice. We work on fixed fees agreed upfront, but every set of advisers' costs belongs in this calculation.

Step 2: the yearly tax, before and after

Owning personally (2027/28)

Owning through a company

So the yearly saving is about £4,000 if every pound is drawn out, or about £6,500 if profits stay in the company to repay debt or fund the next purchase.

These figures assume the company's borrowing costs the same as the personal mortgages. In practice, company lending is often more expensive, and the company has its own running costs.

Step 3: break-even

On these numbers, incorporation is marginal at best for a landlord who needs all the income. It looks better for one who will reinvest. Payback shortens where:

• the landlord has other income, so more rent falls in the 42% or 47% band;
• income is above £100,000, where the personal allowance is lost;
• borrowing is higher relative to rent, so Section 24 bites harder;
• the portfolio will keep growing inside the company; or
• SDLT can properly be reduced.

It lengthens where company mortgages cost more, where the landlord plans to sell within a few years, or where the business test for incorporation relief is doubtful.

Step 4: getting money out later

A company is efficient for profits it keeps. Money you take out is taxed again. The main routes:

• Dividends, at 10.75%, 35.75% or 39.35% above the £500 allowance.
• Director's loan account repayments, which are tax-free but only exist if you lent the company money or took part of the consideration as a loan (which reduces incorporation relief).
• Interest on a director's loan, deductible for the company and taxable on you as savings income, at 22%, 42% or 47% from April 2027.
• Salary, if you genuinely work in the business.

See extracting profits from a property company for the detail.

What the example leaves out

• Inheritance tax. Shares in a property investment company generally don't qualify for Business Relief. A company can make gradual succession easier, but it doesn't remove IHT on its own.
• Selling later. The company's gains are charged to corporation tax, and the cash still has to reach you. Your deferred gain sits in your shares.
• ATED. Dwellings worth over £500,000 held by a company need annual ATED returns, even where relief means no tax is due.
• Lender and leasehold consents, insurance, and tenancy paperwork.

A quick checklist before you decide

• Do you spend 20+ hours a week actively running the lettings?
• What would SDLT be on each realistic basis?
• How much of the profit do you actually need to live on?
• Will your mortgages transfer, and at what cost?
• Do you plan to sell, buy or pass on property in the next ten years?
• Have you modelled 2027/28, not just 2026/27?

Our incorporation calculator gives a first view. A full review tests each assumption against your own figures. We have advised 100+ landlords and portfolios and incorporated £100m+ of property, and we respond the same working day.

This article is general information, not advice. The worked example is illustrative. Tax rules change and their effect depends on your circumstances. Please speak to us before acting.