Transferring a property to a limited company

Transferring property to a limited company can offer significant tax benefits, such as paying corporation tax on rental income instead of personal income tax, which may save money especially for higher-rate taxpayers. It also allows you to claim allowable expenses and mortgage interest tax relief, while providing limited legal liability protection.

However, this process involves costs like Stamp Duty Land Tax (SDLT), Capital Gains Tax, and legal fees. It’s complex and requires professional advice to ensure compliance and assess if it’s the most tax-efficient choice for your situation. Consulting a qualified tax advisor before proceeding is essential.

Transferring a personal property into a company

If you hold one or multiple buy-to-let properties, transferring them into a limited company can offer tax advantages. Limited companies pay corporation tax, which is often lower than personal income tax, and can fully deduct mortgage interest from rental income, unlike individuals.

A limited company is a separate legal entity, offering limited liability protection and potential tax savings through dividend payments and allowable expense claims. However, transferring property triggers Stamp Duty Land Tax (SDLT) based on market value and may involve Capital Gains Tax (CGT) if the property’s value has increased.

Professional advice is essential to navigate these tax implications properly and avoid costly mistakes, especially with recent SDLT rate changes and complex tax rules on property transfers. Consulting qualified tax advisors ensures the transfer is done correctly, maximising benefits while minimising risks.

Tax considerations when transferring property to a limited company

We recommend you seek professional tax advice from a qualified tax advisor when undertaking the transfer of property to a company because there are numerous taxes to consider, these are:

• Corporation Tax
• Stamp Duty Land Tax (SDLT)
• Income Tax
• Inheritance Tax (IHT)
• Capital Gains Tax (CGT)

Below we will consider each of these taxes in more detail.

How to Transfer Property to a Limited Company

Transferring property to a limited company involves several clear steps to make sure ownership changes correctly:

1. Valuation: Get the property valued accurately to determine Stamp Duty Land Tax (SDLT) and any Capital Gains Tax (CGT) implications.

2. Set up the Limited Company: The company must be registered and ready to hold property assets.

3. Agree the Transfer: Draw up a sale agreement between you (the current owner) and your limited company, usually at market value.

4. Complete the Legal Transfer: Submit the TR1 form to transfer the property’s registered title to the company at the Land Registry.

5. Pay Relevant Taxes: Stamp Duty must be paid based on the property’s market value; CGT may apply if the property has appreciated since purchase.

6. Notify Mortgage Provider: Inform your lender; you might need to refinance with a limited company mortgage if there is an existing mortgage.

This process effectively sells the property from you personally to your limited company, so payments and registration must follow legal requirements precisely to ensure the transfer is valid and recognised.

This guide gives simple steps for transferring property ownership to a limited company in the UK.

Advantages of Transferring a Property to a Limited Company

Corporation Tax and Income Tax

Transferring property to a limited company can offer tax savings because limited companies pay corporation tax on profits, which is often lower than personal income tax. For the tax year 2025/26, corporation tax rates are:

• 19% for companies with profits up to £50,000
• A sliding scale between 19% and 25% for profits between £50,000 and £250,000
• 25% for profits over £250,000

In contrast, personal income tax rates are:

• 20% basic rate (up to £37,700)
• 40% higher rate (£37,701 to £125,140)
• 45% additional rate (above £125,140)

Limited company owners can pay themselves through a combination of salary and dividends, which can be more tax-efficient since dividends usually attract lower tax rates. You can also add your spouse as a director or shareholder to utilise their tax-free allowance and lower tax bands.

Benefits of transferring property to a limited company include:

• Potentially lower corporation tax on rental profits
• Limited liability protection
• Ability to retain earnings in the company to reinvest in more properties
• More flexible and tax-efficient ways to extract income, including dividends and pensions

It is crucial to consult a qualified tax advisor to plan tax-efficient profit extraction and avoid pitfalls when transferring property to a limited company.

Find out more about how much tax on rental income is in our landlords guide here.

Allowable expenses

When you own property through a limited company, you can deduct allowable expenses from your rental income to reduce your taxable profit and corporation tax bill for 2025/26. Typical allowable expenses include:

• Mortgage interest and finance costs
• Property maintenance and repairs
• Insurance premiums
• Letting agent and management fees
• Legal and professional costs

These deductions help maximise your rental income after tax. Always keep records and consult a qualified tax advisor to ensure your expenses are correctly claimed and compliant with current rules.

Mortgage interest

Mortgage interest tax rules changed significantly for individual landlords in recent years. From April 2020 through the 2025/26 tax year, individuals renting out property can no longer deduct mortgage interest from their rental income. Instead, they receive a tax credit worth 20% of their mortgage interest payments. This means:

• Landlords pay tax on the full rental income before the tax credit is applied.
• Higher and additional rate taxpayers lose out on the previous full mortgage interest relief, increasing their tax bills.

In contrast, limited companies can still fully deduct mortgage interest as a business expense against rental income. This makes owning property in a limited company more tax-efficient and is a key reason many landlords consider transferring property into a company.

Before transferring property to a limited company:

• Check with your mortgage lender if the existing mortgage can be retained after the transfer, as some lenders may not permit this.

These mortgage interest rules remain current for the 2025/26 tax year

Capital Gains Tax (CGT) and Incorporation Relief

Capital Gains Tax (CGT) savings may be possible when transferring property into a limited company. Instead of a direct sale, you can receive shares in the company in exchange for your properties. CGT is not triggered at transfer because the shares have a base cost equal to the original property cost, deferring tax until you sell the shares.

Incorporation relief applies if HMRC considers you run a ‘property business’ generally where you spend at least 20 hours a week managing a sufficient property portfolio. To qualify for this relief in 2025/26:

• You must be a sole trader or in a partnership
• Transfer the entire property business and its assets (except cash)
• The company acquires properties at market value

With incorporation relief, CGT is delayed until the company disposes of the properties. When sold, CGT is due on the increase in value since the transfer, not on the gains before incorporation. This means tax is paid on post-transfer growth only, providing potential tax deferral benefits.

Inheritance tax (IHT)

Following a transfer of property to a limited company, your estate will hold the shares in that company instead of the properties themselves. The value of these shares usually reflects the current market value of the properties owned by the company.

To manage Inheritance Tax (IHT) exposure in 2025/26, certain strategies can be used, such as:

• Issuing different classes of shares to control value growth and rights
• Establishing a Family Investment Company structure
• Using loans or director’s loan accounts within the company to reduce chargeable value

Shares in private limited companies may also qualify for Business Relief, which can reduce or eliminate IHT on the shares if certain conditions are met, such as owning the shares for at least two years. The standard IHT nil-rate band remains £325,000, with a 40% charge on amounts above this threshold.

This structure offers potential to reduce IHT on future growth in property value through tailored planning and share arrangements while the fundamental tax rules on estates and shares continue to apply.

Limited liability

Because a sole trader owns property personally, they are fully responsible for any debts, losses, or legal issues related to their properties. This personal liability extends to business loans and can affect their individual credit rating.

Setting up a limited company creates a legal separation between the business and its owners. The company itself is responsible for any debts, financial losses, or legal disputes, protecting your personal assets. Business and personal finances stay separate, with company assets held within the business. This means you are not personally required to use your own money to pay company debts, providing stronger protection.

Key benefits of limited liability for 2025/26 include:

• Liability limited to the amount invested in the company’s shares
• Protection of personal assets from company debts and legal actions
• Separation of business and personal finances
• Company responsible for its own financial risks and losses

This protection is a major advantage when transferring property into a limited company, reducing personal financial risk.

Disadvantages of Transferring a Property to a Limited Company

Transferring property into a limited company can have disadvantages. These include higher mortgage costs, as company mortgages often come with higher interest rates and fees. You may also face additional costs such as Stamp Duty Land Tax (including the 3% surcharge) and Capital Gains Tax based on the property’s market value.

Furthermore, owning property through a company means dealing with ongoing administrative responsibilities and potential double taxation when extracting profits as dividends. These factors can affect overall cost-effectiveness in 2025/26.

How Stamp Duty Land Tax is Calculated When Transferring Property to a Limited Company

When you transfer a property to your limited company, Stamp Duty Land Tax (SDLT) is calculated on the open market value of the property at the time of transfer, not on what the company may pay. This means the SDLT cost is based on what the property would sell for on the open market.

Key points for the 2025/26 tax year:

1. SDLT rates for transfers to limited companies include an additional 5% surcharge on residential properties.

2. From 1 April 2025, residential SDLT rates for companies are:

   1. 0% on the first £125,000
   2. 7% on the next £125,000 (portion £125,001 to £250,000)
   3. 10% on the next £675,000 (portion £250,001 to £925,000)
   4. 15% on the next £575,000 (portion £925,001 to £1.5 million)
   5. 17% on amounts above £1.5 million

3. If the property is your main residence and you transfer it to a limited company before buying a new home, the 3% additional SDLT surcharge for second homes does not apply.

4. If you transfer your current residence to a limited company within 3 years of buying a new home, you may reclaim the 3% surcharge paid on the new home from HMRC.

This SDLT calculation ensures you pay the correct tax based on the property’s value and prevents avoiding tax by undervaluing the transfer.

Ownership Changes

When you transfer property to a limited company, you no longer own it personally; instead, the company becomes the legal owner . You, as an individual, will then own shares in that company. This change in ownership structure can introduce complications, particularly concerning existing mortgages and obtaining new financing.

If you have a current mortgage on the property, you may face early repayment charges . Additionally, the company will need to secure a new mortgage, often a more expensive limited company mortgage. Mortgage lenders may also have specific requirements or restrictions for properties held within a corporate structure, as it’s considered a sale from one entity to another

Mortgage Considerations

Transferring property ownership to a limited company can cause mortgage challenges because you cannot personally mortgage a property you no longer own. Most lenders will not allow you to transfer an existing personal mortgage to the limited company.

As a result, you will likely need to repay your existing personal mortgage in full and arrange a new commercial mortgage for the limited company. Commercial and limited company buy-to-let mortgages usually have higher interest rates and fees than personal residential mortgages, increasing your borrowing costs.

In 2025, commercial mortgage rates remain higher due to lender risk assessments and regulatory factors, so expect increased finance costs after transferring property into a company structure.

Additional Costs When Running a Limited Company

Running a limited company for your property portfolio involves some extra costs beyond standard property expenses. Key costs to consider include:

• Legal fees for property transfers and company formation
• Accountancy fees for preparing annual accounts, Corporation Tax returns, and Confirmation Statements
• Higher mortgage arrangement fees and interest rates for limited company loans
• Ongoing company administration and compliance costs

Despite these additional expenses, many property owners find the overall tax savings and limited liability benefits outweigh the costs, making a limited company structure a worthwhile option.

Conclusion

We advise landlords on running their property portfolios within a limited company as it is generally the most tax-efficient option. Many landlords see the benefit of undertaking a transfer if they have begun their landlord business personally owning property initially.

We often find that people inherit a second property, or decide to buy a second property but don’t consider the many benefits and tax savings of property ownership within a limited company.

Seeking advice from our qualified tax team will ensure you undertake the transfer properly and avoid unnecessary charges. Please contact dns on 03300 886 686 or email us on enquiry@dnsaccountants.co.uk. today to find out more about transferring property to a limited company or any other property related questions you have.

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