Property Transfer

Transfer Property into a Company: Full UK Guide

Introduction
Many landlords in the UK are moving their rental properties into limited companies. The main reason? Mortgage interest is fully deductible for companies but not for individuals. However, this process involves more than just forming a company and moving the title. You need to carefully manage Stamp Duty Land Tax (SDLT), Capital Gains Tax (CGT), and HMRC compliance. In this blog, we explain how it works, how to reduce taxes, and which route is best for couples.

Why Transfer Property to a Company?
Since 2020, landlords who own property personally can no longer deduct full mortgage interest. They only get a 20% basic-rate credit. This means higher-tax-rate landlords often pay tax on profit they never receive.

Limited companies don’t have this issue. They can deduct 100% of their mortgage interest from rental income. If your properties are mortgaged and profitable, this alone can justify incorporation.

Two Main Transfer Options

Option 1: Direct Transfer to a Company
You and your spouse can set up a new company and legally transfer the property into it. The company either remortgages or takes over the loan. You may be able to roll over any capital gain using Incorporation Relief (s162 TCGA 1992), as long as the transfer includes an active “property business” and you take shares in return.

Option 2: Partnership First, Then Incorporate
This route helps you avoid SDLT entirely if structured correctly. Here’s how it works:

1. Form a formal partnership or LLP with your spouse.

2. Actively manage the lettings business as partners for at least three years.

3. Transfer the entire partnership business into a limited company.

If you do this correctly, you can avoid both SDLT and CGT.

Stamp Duty Land Tax (SDLT)
When you transfer a property to your own company, SDLT normally applies at full market value, even if there’s no cash paid. If the company takes over the mortgage, that debt counts as part of the chargeable amount. The 3% surcharge for additional properties still applies.

However, if you transfer the property from a genuine partnership where both partners own the company in the same ratio, SDLT can be reduced to nil under Schedule 15 FA 2003. This only works if:

• You’ve run a real business, not just passive letting.

• You’ve held the property in partnership for a meaningful period (ideally 3 years).

• The company mirrors the ownership split exactly.

HMRC closely monitors this, especially since publishing Spotlight 63 which warns against using LLPs as SDLT loopholes.

Capital Gains Tax (CGT)
When you move property into a company, you may face CGT on any gain. However, there are two main ways to defer CGT:

• Incorporation Relief (s162) rolls the gain into the shares of the company. No CGT is due if you receive only shares and transfer a full business.

• Gift Relief (s165) can apply if the transfer is treated as a gift, but this route is more complex and not automatic.

For most couples who run their lettings as a business and take only shares, s162 Incorporation Relief is the cleanest option.

Creating a Genuine Partnership

To qualify for SDLT relief, you need a real business and a real partnership. This isn’t just co-owning property. You must show joint active management.

The best way is to draw up a Partnership Deed. This legal document should:

• List both names and confirm a start date.

• Describe the business (letting, managing, maintaining property).

• Confirm that properties are held as partnership assets.

• Explain how profits are split.

• Assign roles and require quarterly meetings.

• Be signed and witnessed as a deed.

You must also:

• Register the partnership for Self Assessment.

• Open a separate partnership bank account.

• Keep records, invoices, and management logs.

After running the partnership for at least 3 years, you can transfer it to a company with no SDLT and full CGT deferral.

Capital Allowances and Fixtures

If your properties have heating systems, lifts, alarms or similar plant, use a Section 198 election when transferring to ensure the company can continue claiming allowances. If the transfer includes multiple fixtures, you can also use a Section 266 election to simplify the process.

Turning Investment into Trading Property

Another option is to turn investment property into trading stock (e.g. developing and selling). This triggers CGT upfront, but future profits will be taxed as trading income in the company. This approach works best for property developers, not buy-to-let landlords.

Which Relief Is Best?

• If you only take shares, use s162 Incorporation Relief to defer CGT automatically.

• If you need to transfer only part or want cash out, consider Gift Relief under s165 (but you must claim it).

• If you want to avoid SDLT, the partnership-then-incorporate route works—but only for real businesses run for a credible time.

Example

Adam and Samar own two mortgaged buy-to-let flats worth £600,000 with £300,000 debt. They sign a Partnership Deed in April 2025, run it as a true business (repairs, tenant management, accounts), and keep full records. In April 2028, they incorporate. Because:

• They ran a real business,

• Ownership stayed 50:50,

• They took only shares in return,

they pay no SDLT, no CGT, and the company starts deducting full mortgage interest.

Conclusion

If you and your spouse own rental properties and actively manage them, moving them into a limited company can reduce tax and unlock full mortgage interest relief. But the route you take matters. The partnership route, backed by a clear Deed and a few years of proper trading, is the cleanest way to eliminate SDLT and defer CGT.

Make sure you get the right documents in place, register the partnership correctly, and plan the timeline carefully. Once done, you’ll have full control, tax efficiency, and clean company ownership for the future.

📞 Written by etaxfiling.co.uk

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