Incorporation relief (s162 TCGA 1992) on a property portfolio: how it works in 2026
Moving an existing personally-owned buy-to-let portfolio into a limited company is one of the most-asked tax questions in UK lettings. It is also one of the most-misunderstood. The transaction is not a paper re-registration. To HMRC it is a disposal by the personal owner and a fresh acquisition by the company, which crystallises capital gains tax for the individual and triggers stamp duty land tax for the company. Section 162 of the Taxation of Chargeable Gains Act 1992 can defer the CGT in narrow circumstances; nothing defers the SDLT.
This piece walks the mechanics: what s162 does, what the "business" threshold means after Ramsay v HMRC, how the SDLT bill is calculated post-MDR-abolition, and the order of operations that determines whether incorporation works at all.
This is general information, not advice. The reliefs and reliefs-on-reliefs in this area are unusually fact-sensitive. Speak to a qualified tax adviser before acting.
Why personal incorporation is a tax event, not a re-registration
When a landlord owns three flats in their personal name and then "transfers" them into a new limited company, two distinct tax engines fire simultaneously.
CGT engine (personal). Each property leaves the personal owner at market value (HMRC connected-party rule, s.17 and s.18 TCGA 1992). Any uplift over the original acquisition cost is a chargeable gain. From 30 October 2024 the higher-rate CGT rate on residential property is 24% (lower rate 18%); the annual exempt amount is £3,000 per person for 2026-27.
SDLT engine (company). The company is the purchaser. Even though no money changes hands in cash, the consideration is the market value of the properties transferred (s.53 FA 2003 connected-company deemed-market-value rule). Stamp duty is calculated on that consideration at the standard slabs plus the 5% additional-property surcharge (the surcharge sits at 5% from 31 October 2024 onwards; before that date it was 3%).
Both bills are due at the same point on the same set of properties. The personal owner pays CGT; the company pays SDLT. They are separate taxpayers, separate engines, separate deadlines.
Section 162: what it actually defers
Section 162 TCGA 1992 is incorporation relief. Where the conditions are met, the gain on the disposal is not taxed at the point of incorporation — instead it is rolled into the base cost of the shares the personal owner receives in the new company. The tax is deferred, not forgiven: when the shares are later sold, the deferred gain crystallises along with any growth in share value.
Three statutory conditions (s.162(1)):
- A business is transferred as a going concern.
- The transfer is to a company.
- The whole of the assets of the business (or all assets other than cash) are transferred.
- The consideration is wholly or partly shares issued by that company.
Where the consideration is part shares, part something else (cash, loan note, assumption of debt), only the share-proportion of the gain qualifies for relief. The non-share consideration is taxed immediately.
S162 is automatic if the conditions are met — there is no election. The opposite election (s162A) is available where the taxpayer wants to disapply the relief, typically to use a current-year capital loss or to crystallise gain at a lower rate before a rate rise.
The "business" threshold — Ramsay v HMRC and HMRC Brief 14/2014
The fault line for most personal landlords is the word "business" in s162(1). HMRC's historic position was that letting residential property is investment, not business, and therefore not eligible for s162. The Upper Tribunal disagreed.
In Ramsay v HMRC [2013] UKUT 0226 (TCC) the Tribunal held that an individual landlord running 10 flats and spending approximately 20 hours per week on the activity was carrying on a business for s162 purposes. HMRC accepted the decision and issued HMRC Brief 14/2014 confirming that residential lettings can qualify provided the activity is on a sufficient scale and the hours are documented.
The Brief is not a bright line. The factors weighed by HMRC in practice, drawn from Ramsay:
- Number of properties — single-property portfolios rarely qualify.
- Hours actively worked — Ramsay found 20 hours/week sufficient; the Brief notes no minimum but treats fewer than 20 with scepticism.
- Range of activities — viewing tenants, handling repairs, dealing with regulatory compliance, marketing voids, rent collection in person.
- Use of an agent — heavy outsourcing to a managing agent reduces the personal owner's "hours" and pushes the activity back toward investment.
- Scale of receipts and length of trading history — a portfolio built over years with documented ongoing activity weighs in favour.
A landlord with a single buy-to-let property managed by an agent will almost never meet the bar. A landlord with 8-12 self-managed properties and documented evidence of hours has a defensible case. The middle ground is where most disputes sit.
Worked example: a £600,000 portfolio of three flats
Take a personal landlord who owns three flats acquired over the past decade, now worth £200,000 each (total market value £600,000). Total original acquisition cost was £400,000; total gain on incorporation is £200,000. All numbers in 2026-27 rates.
| Tax engine | Headline figure | Notes |
|---|---|---|
| CGT (without s162) | £47,280 | (£200,000 − £3,000 AEA) × 24% residential rate |
| CGT (with s162 relief) | £0 at incorporation | Gain rolled into share base cost; tax deferred |
| SDLT on the company | £50,000 | Standard slabs £20,000 + 5% surcharge £30,000 |
| Total at incorporation (s162 path) | £50,000 | Deferred CGT bill remains attached to the shares |
The SDLT figure breaks down as follows under the standard England slabs aggregated under the linked-transactions rule:
| SDLT band | Slice (£) | Rate | Tax |
|---|---|---|---|
| 0 – 125,000 | 125,000 | 0% | £0 |
| 125,000 – 250,000 | 125,000 | 2% | £2,500 |
| 250,000 – 925,000 | 350,000 | 5% | £17,500 |
| Standard total | 600,000 | £20,000 | |
| Additional-property surcharge (5% of full consideration) | 600,000 | 5% | £30,000 |
| SDLT due on the company | £50,000 |
These figures track the live Homecost stamp-duty calculator when the additional-property flag is set. The standard slab calculation against HMRC's published table (residential property rates) returns £20,000 on £600,000; the 5% surcharge under Sch 4ZA FA 2003 sits on top of the full consideration whenever the purchaser is a company acquiring a dwelling.
The headline: a typical three-flat portfolio incorporation costs £50,000 in SDLT alone. The CGT can be deferred. The stamp duty cannot.
What MDR abolition means for portfolio transfers
Pre-1 June 2024, Multiple Dwellings Relief (MDR) under Sch 6B FA 2003 was the main SDLT mitigation tool for portfolio transfers. MDR worked by dividing the aggregate consideration by the number of dwellings, applying the slabs to the per-dwelling figure, and then multiplying back up — for the £600,000 / three-flat example above, MDR would have computed £200,000 per dwelling (slabs of £1,500 standard each, three dwellings = £4,500 standard, plus £30,000 surcharge = £34,500 total). MDR saved £15,500 in this example.
MDR was abolished by s.115 Finance (No.2) Act 2024 for transactions with an effective date on or after 1 June 2024 (subject to transitional rules for contracts exchanged before 6 March 2024). For incorporations completing in 2026 the linked-transactions rule applies in full: aggregate consideration goes to the slabs directly. There is no per-dwelling division, and the aggregate consideration reaches the 5% slab at £250,000 of the combined price. This systematically increases SDLT on portfolio incorporations versus the pre-June-2024 regime.
For a six-property portfolio of £200,000 flats (£1.2M aggregate), the SDLT figure rises further: standard slabs return £53,750 on £1.2M, plus the 5% surcharge on the full £1.2M of £60,000 = £113,750 total. Larger portfolios push into the 10% slab over £925,000 and the 12% slab over £1.5M, magnifying the abolition impact.
Boundary check: the £500k-per-dwelling Schedule 4A line
A separate engine applies if any individual dwelling in the portfolio is worth more than £500,000. Schedule 4A FA 2003 imposes a flat 17% SDLT charge (rate raised from 15% to 17% by Finance Act 2025, effective 31 October 2024) on a dwelling acquired by a company where the consideration for that dwelling exceeds £500,000. The relief in Sch 4A para 5 — the property-rental-business relief — restores the standard slabs plus surcharge for genuine letting activity, but the relief is clawed back if the property is occupied by a connected non-qualifying individual within three years.
The mechanics of the £500k / 17% line, and how Sch 4A interacts with ATED (Part 3 FA 2013) on annual basis, are covered in the limited-company landlord twin rules guide. For a £200k-per-flat portfolio like the worked example above, every dwelling sits below the £500k line and the flat 17% does not arise; the standard slabs plus 5% surcharge are the operative engine.
Order of operations
Three points on procedure that determine whether incorporation works at all:
- The transfer must happen in one transaction, not phased over months. S162(2)(b) requires the whole of the business assets to transfer. Partial transfers fail the test and the deferred relief is lost.
- The shares must be issued at the same point as the asset transfer. A typical structure: the company is incorporated, the personal owner signs a transfer of the properties in exchange for shares, both legs complete on the same day, the SDLT1 is filed within 14 days.
- The "business" evidence must exist before the transfer, not constructed afterwards. Ramsay-style hours logs, documented management activity, accounts showing rental receipts, and a clean separation from any managing agent are the kind of contemporaneous evidence HMRC examines on enquiry. A landlord who hires a managing agent in year 8 and then claims business status in year 10 is exposed.
Where this fits in the corporate-BTL stack
Incorporation relief is one decision point in a longer chain. Once the portfolio is inside the company, the cost-stack changes — corporation tax on rental profit, dividend tax on extraction, mortgage-interest relief restored — but the structural saving only materialises in narrow conditions. The full personal-vs-corporate comparison is laid out in the corporate-vs-personal BTL cost stack guide, and the additional-property surcharge mechanic that drives the £30,000 in the worked example is detailed in the additional-property SDLT surcharge explainer.
For a regional sanity check on the underlying property values used in the worked examples, the Homecost postcode tool returns recent sale-price benchmarks and council-tax bands for any UK postcode — useful when checking that a portfolio's market-value entry into the company reflects local comparables.
Where the maths goes wrong most often
Across published case-law and the HMRC SDLT manual, the recurring failure points on incorporation:
- Treating CGT and SDLT as one bill. They are not. S162 defers CGT only.
- Assuming MDR is still available. It is not, for completions on or after 1 June 2024.
- Missing the connected-party deemed-market-value rule on SDLT. The price-paid is irrelevant; SDLT runs off market value (s.53 FA 2003).
- Failing the Ramsay business test. Most single-property and agent-managed portfolios do not meet the bar.
- Phasing the transfer. Partial transfers do not get s162 relief.
- Not budgeting for the SDLT cheque. The CGT can be deferred. The SDLT is due on completion. Cash flow planning needs to reflect that.
Compliance disputes in this area are routine. HMRC has multiple powers to investigate after the fact — the discovery-assessment window for SDLT is covered in the SDLT discovery and carelessness evidence bar guide, and CGT enquiries by HMRC on the personal return have their own statutory framework.
Speak to a qualified tax adviser before acting. Incorporation reliefs are unusually fact-sensitive and the consequences of getting it wrong — irrecoverable SDLT, a crystallised CGT bill that cannot be re-deferred, or an HMRC enquiry that pulls back the relief — are all permanent.
Other guides in this series are listed in the Homecost blog index.
Based on HMRC published guidance, the Taxation of Chargeable Gains Act 1992, the Finance Act 2003 (as amended by Finance (No.2) Act 2024) and the Upper Tribunal decision in Ramsay v HMRC [2013] UKUT 0226 (TCC). SDLT figures verified against the Homecost stamp-duty calculator on 2 June 2026.