How Incorporation Relief Can Help Landlords Save Thousands in Tax

PKPI

If you’re a landlord with a growing property portfolio, rising taxes may be eating into your profits more than ever before. Between Capital Gains Tax (CGT), Stamp Duty Land Tax (SDLT), and new limits on mortgage interest relief, many landlords are finding it harder to generate real income from their investments. 

The tax burden on landlords is growing and it’s being felt across the UK. 

Whether you’re selling a property, refinancing, or just managing your day-to-day rental income, the financial pressure is real. Increased taxation and tighter regulations are cutting deeper into profit margins, leaving many landlords wondering how to protect and grow their portfolios. 

Common points include: 

• Capital Gains Tax (CGT) on property sales, up to 28% 

• Stamp Duty Land Tax (SDLT) on property transfers 

• Restrictions on mortgage interest relief for individual landlords 

• Growing complexity in compliance and reporting 

• Lack of limited liability protection when properties are held in your own name 

At pkpi.uk, we’ve seen too many landlords lose out simply because they weren’t aware of smarter ways to structure their property business. At PKPI we have a tax strategy that can significantly reduce your liabilities and improve long-term profitability and i.e., Incorporation Relief. 

What is Incorporation Relief? 

Incorporation Relief is a tax relief under Section 162 of the Taxation of Chargeable Gains Act 1992, allowing landlords to transfer a qualifying property business into a limited company, and defer Capital Gains Tax (CGT) in the process. 

How It Works: 

When you transfer your property portfolio to a company in exchange for shares, you don’t pay CGT immediately. Instead, the tax is deferred until you sell those shares in the future. 

This move can unlock powerful tax benefits especially when guided by the team at pkpi.uk, who specialise in helping landlords' structure efficient, compliant incorporations. 

Key Conditions to Qualify 

To benefit from Incorporation Relief, HMRC must see your property activity as a “business”, not just a passive investment. 

Our experts at pkpi.uk help landlords build and present their case effectively, based on clear documentation, consistent management activity, and strategy. 

1. You Actively Manage the Properties 

Generally, 20+ hours per week of active involvement (e.g., tenant management, repairs, rent collection) is considered sufficient. 

2. You Own the Properties Personally 

Relief applies when transferring property into a company in exchange for shares, not cash. 

3. Stamp Duty Land Tax (SDLT) Rules 

You may still face SDLT unless the properties are in a genuine long-standing partnership pkpi.uk’s  expert team can help you assess and document correctly. 

Case study:  Ramsay vs HMRC (2013) 

 Background 

Elizabeth Moyne Ramsay was a landlord who owned and managed a portfolio of residential properties. Like many landlords, she decided to transfer her portfolio into a limited company to benefit from tax efficiencies, particularly from the Incorporation Relief,  

However, HMRC challenged her claim, arguing that her property portfolio was simply a passive investment, not a “business,” and therefore did not qualify for the relief. 

The Issue 

To claim Incorporation Relief under Section 162 of the Taxation of Chargeable Gains Act 1992, a landlord must prove that they run a property business, not just own investment assets. HMRC believed Mrs. Ramsay’s level of involvement wasn’t active enough to meet this test. 

What Mrs. Ramsay Did 

• She personally managed all aspects of her portfolio 

• Spent approximately 20 hours per week on property-related duties 

• Tasks included: 

• Tenant communications 

• Arranging repairs 

• Managing bookings 

• Handling financial matters 

Her commitment went beyond simply collecting rent, she was actively involved in day-to-day operations. 

The Tribunal’s Decision 

The First-tier Tribunal ruled in favour of Mrs. Ramsay, confirming that: 

❝ Her level of activity met the threshold for running a business, not a passive investment. ❞ 

The key factor was active involvement and time commitment, not the number of properties owned by the company. 

Why This Case Matters 

This case set a legal precedent for landlords seeking Incorporation Relief. It demonstrated that even without a massive portfolio, you can qualify if you manage it as a business. 

At pkpi.uk, we regularly use this case to support our clients’ applications and help them prove they meet HMRC’s “business” test. 

Why Incorporation Can Be a Smart Move 

Landlords who incorporate properly with professional advice gain more than just tax relief: 

 CGT Deferral through Incorporation Relief 

•  Potential SDLT Exemption for valid partnerships 

•  Full mortgage interest deduction 

•  Limited liability protection 

•  Tax-efficient income through salaries/dividends 

•  Improved pension & retirement planning 

•  Smooth succession via share transfers 

•  Access to investors via share issuance 

Our tax experts at pkpi.uk evaluate your entire portfolio and design a custom incorporation plan to meet both your current needs and future goals. 

 Let’s Structure Your Property Business Smarter at PKPI 

Many landlords try to incorporate their property business on their own — and get tripped up by: 

• SDLT charges they didn’t anticipate 

• CGT triggered due to technical missteps 

• HMRC not accepting the business status of their portfolio 

• Lenders rejecting mortgage transfers 

• Missed reliefs they legally could have used 

FAQs 

1. What is Incorporation Relief and how does it benefit landlords? 

A. Incorporation Relief allows landlords to transfer a qualifying property business to a limited company without immediately paying Capital Gains Tax (CGT). The tax is deferred until the shares received in exchange for the properties are sold, making it a powerful tax-saving strategy for active landlords. 

2. Do all landlords qualify for Incorporation Relief? 

A. No. To qualify, landlords must prove they run a genuine property business, not just hold investments. This typically involves actively managing properties for 20+ hours per week, handling tenants, maintenance, finances, and more. Passive investors are unlikely to qualify. 

3. Will I still need to pay Stamp Duty Land Tax (SDLT) when I incorporate? 

A. Yes, unless your properties are held in a long-standing partnership (typically 3+ years), SDLT is still payable when transferring properties to a company. However, some partnerships may qualify for SDLT exemption if they meet HMRC’s criteria — something pkpi.uk can help assess. 

4. What risks or pitfalls should I avoid when incorporating my portfolio? 

A. Common mistakes include: 

• Triggering unexpected CGT or SDLT 

• Failing to meet the business activity test 

• Poor structuring of ownership or mortgage transfers 

• Not getting expert tax advice 

Working with specialists like pkpi.uk can help avoid these issues and ensure full compliance. 

 5. Can Incorporation Relief be applied retroactively? 

A. No. Incorporation Relief must be planned and structured before the transfer of assets. Once the transfer is complete without proper planning, it’s too late to claim relief. Always seek advice from a qualified tax advisor like pkpi.uk before acting. 

Don’t risk going it alone. 

With pkpi.uk, you’ll have an experienced tax advisory team guiding every step — from business status evaluation to full legal structuring and post-incorporation compliance. 

At pkpi.uk, we don’t just help you save on tax. We help you build a property business that’s scalable, sustainable, and protected. 

Book Your Consultation at pkpi.uk or Call +44 2079 418160 

We’ll assess: 

• Your current ownership structure 

• Business activity & hours 

• SDLT and CGT exposure 

• Timing and strategy 

• Your long-term financial goals 

Whether you’ve tried and failed to incorporate or are exploring it for the first time then pkpi.uk is your partner in smart property structuring. 

Incorporation Relief is one of the most powerful, underused tax tools for UK landlords and when executed with strategy, it can unlock massive long-term benefits.