Should I transfer my buy-to-let properties to a limited company?

Benefits of a limited company

There is no reliable property-count rule for deciding whether a limited company is worthwhile. The result depends on existing gains and mortgages, SDLT, whether incorporation relief is available, expected profits, borrowing terms, how long the properties will be held and how the owners plan to take money from the company. Transferring an existing portfolio can create substantial one-off costs even where company ownership may be attractive for future purchases.

But if you operate a substantial lettings business, one potential advantage of a limited company is that the company pays Corporation Tax on its profits. For the financial year beginning 1st April 2026, the small profits rate is 19% for profits of £50,000 or less. The main rate is 25% for profits above £250,000, with marginal relief between those limits. The thresholds are reduced where there are associated companies or a short accounting period. You may also pay Income Tax when you take money out of the company.

Deductible finance costs

A company’s finance costs are generally deductible when calculating its taxable property profits, subject to the Corporation Tax loan relationship rules. The restriction that limits individual residential landlords to a basic-rate tax reduction does not apply to companies.

A meaningful comparison must use the landlord’s current borrowing cost, company mortgage terms, Corporation Tax rate, personal tax position and method of extracting profits. It should also include the one-off tax and refinancing costs of transferring existing property.

Why transferring an existing property can be expensive

If you hold a property personally and transfer it to a company you control, the transfer is normally treated as taking place at market value. On a residential property worth £300,000 in England or Northern Ireland, assuming no relief applies, consider:

• Stamp Duty Land Tax for the company of £20,000 under the rates applying from 1 April 2025.
• Capital Gains Tax for the transferor after allowable costs, losses, reliefs and the £3,000 annual exempt amount. For 2026/27, gains are taxed at 18% to the extent that they fall within the unused basic-rate band and 24% above it. Any CGT due on UK residential property normally has to be reported and paid within 60 days of completion.
• The cost and availability of a new company mortgage, valuation and legal work.
• Early repayment charges, arrangement fees and other costs on the existing mortgage, where relevant.

Do not assume incorporation relief is unavailable. Section 162 applies to the transfer of a business, which is wider than a trade, and eligibility depends on the facts. HMRC guidance says it will accept that relief is available where an individual personally spends at least 20 hours a week undertaking activities indicative of a business. Cases involving fewer hours must still be considered carefully. Transfers on or after 6th April 2026 require a claim.

Business Asset Disposal Relief

Business Asset Disposal Relief, formerly Entrepreneurs’ Relief, has different conditions and will not normally apply to an ordinary property-letting business. Company mortgage availability, pricing and underwriting vary by lender and applicant, so obtain a whole-of-market comparison from an appropriately authorised mortgage adviser before deciding.

For 2026/27, the dividend allowance is £500. Dividends above the allowance are taxed at 10.75% within the basic-rate band, 35.75% within the higher-rate band and 39.35% within the additional-rate band. The allowance is a zero-rate band, not an exemption, and dividends still use up tax bands.

That said, a transfer at market value may create a credit on a director’s loan account. Repayment of a genuine credit balance is normally a capital repayment rather than income, but the balance depends on the consideration, debt assumed and equity transferred. The CGT, SDLT, incorporation-relief and company-law treatment must be established before relying on this.

Limited company administration

Also, don’t forget the additional administration and costs of running a limited company: annual accounts, Corporation Tax returns, Companies House filings, separate banking and bookkeeping, mortgage compliance and possible professional fees. Most small property companies are audit-exempt, so that is rarely a cost.

A company holding a UK dwelling worth more than £500,000 must also consider the Annual Tax on Enveloped Dwellings. Property-rental-business relief may remove the annual charge, but a relief declaration return may still be required. A separate 17% SDLT corporate rate can apply to acquisitions over £500,000 unless a relief applies. Obtain transaction-specific advice, including on any partnership provisions, before transferring a portfolio.

Making a proper comparison

Transferring existing property to a company can create immediate tax, finance and legal costs. Whether those costs are outweighed over time depends on projected profits, borrowing, plans for taking money out, ownership, available reliefs and the expected holding period.

A proper comparison should consider three options separately: retaining personal ownership, transferring existing properties and using a company only for future purchases. From 6th April 2027, calculations for personal ownership in England, Wales and Northern Ireland must also use the new property-income rates of 22%, 42% and 47%.

When a limited company may still make sense

If transferring your existing properties is too expensive, you can leave them in personal ownership and consider using a company for future purchases. This avoids triggering the immediate tax and refinancing costs of transferring the existing portfolio, but it does not make company ownership automatically better.

Company ownership may be more attractive if you:

• Do not need to take all the profits out in the short term and can retain money in the company; or
• Plan to build and hold a larger portfolio over the long term.

These factors do not settle the question. The best structure depends on your existing gains and borrowing, expected profits, finance costs, plans for taking money out and intended holding period.

THP can help you compare retaining personal ownership, transferring an existing portfolio and using a company for future purchases before you decide.