From 6 April 2027, individual landlords in England, Wales and Northern Ireland will pay property income tax at 24%, 44% and 49%. The Autumn Budget on 28 October 2026 increased the rates by a further two percentage points, widening the gap between the highest personal property income rate and the 25% main Corporation Tax rate.
Higher property income tax rates may strengthen the case for company ownership for some landlords. However, buying future properties through a company and transferring an existing portfolio are very different decisions, with potentially very different tax consequences.
Two decisions that should be considered separately
The case for company ownership should be assessed through two distinct lenses:
1. Setting up a company to acquire a new property portfolio
Where a landlord is planning future acquisitions and has not yet built the portfolio personally, a company can provide a relatively straightforward structure from the outset. The properties, borrowing and rental income sit within the company from acquisition, avoiding the need to transfer existing assets later.
How the tax comparison can work
Although the 25% main corporation tax rate is lower than the 49% additional property income rate, that difference does not represent an automatic tax saving. Further personal tax can arise when profits are extracted from the company, for example through dividends.
The relative benefit therefore depends significantly on how much profit is retained within the company, how long it can remain invested and when the owners ultimately need to access it personally.
Company ownership can therefore be more compelling where rental profits can remain within the company and be reinvested over the medium to long term. A landlord who needs most of the rental profit for personal spending may reach a very different conclusion.
The treatment of borrowing can be a key advantage
A company can generally deduct qualifying loan interest when calculating taxable property profits. For a newly acquired and financed portfolio, qualifying interest costs can therefore reduce the rental profits on which the company pays corporation tax.
Individual landlords with residential property are instead subject to restrictions on finance-cost relief. For a highly geared portfolio, the ability to deduct qualifying interest within the company can materially change the comparison between personal and corporate ownership, particularly where post-tax profits are retained for further investment.
Financing still needs to be considered alongside tax. Company borrowing may come with different interest rates, fees, guarantees and affordability requirements, so the commercial cost of finance should form part of the overall modelling before properties are acquired.
Company ownership may therefore warrant closer consideration where future acquisitions are planned, the portfolio will carry significant finance costs and profits can remain within the company for reinvestment. Long-term ownership and succession objectives should also form part of that decision.
2. Transferring an existing property portfolio to a company
Transferring properties that are already personally owned is a very different proposition. It is normally treated as a disposal and acquisition rather than an administrative change, even where the same individuals continue to control the portfolio through the company. The potential upfront tax and commercial costs therefore need to be weighed against any longer-term benefits of corporate ownership.
Capital Gains Tax and Section 162 incorporation relief
Moving an existing portfolio into a company can create a capital gains tax (CGT) charge because the properties are normally treated as being transferred at market value. In some circumstances, s162 incorporation relief can defer some or all of that gain, although strict conditions apply. Whether a property portfolio qualifies needs to be considered carefully rather than assumed.
For transfers on or after 6 April 2026, the relief must be claimed through the self assessment return rather than applying automatically.
What happens to existing mortgages?
Existing borrowing can make an incorporation more complicated. Where a company takes on debt connected with the portfolio, this can affect the amount of CGT relief potentially available.
A tax concession known as ESC D32 can sometimes prevent qualifying business debt taken on by the company from restricting incorporation relief. However, its application depends on the circumstances and should not be assumed.
HMRC is reviewing how ESC D32 applies to modern banking arrangements. This makes it particularly important to understand exactly what will happen to existing mortgages and other borrowing before assuming that the associated debt will not affect the CGT position.
Could moving the properties trigger other taxes?
Moving an existing portfolio into a company may create a property transaction tax charge, with the relevant tax depending on where the property is located:
- SDLT in England and Northern Ireland
- LBTT in Scotland
- LTT in Wales
VAT should also be considered. It is rarely the headline issue for a portfolio consisting entirely of standard residential lettings, but it can become relevant where the portfolio includes commercial property, mixed-use assets, serviced accommodation, development activity or properties subject to an option to tax.
Refinancing and commercial costs
If properties are mortgaged, a transfer will likely require lender consent, novation or refinancing. That can bring different interest rates and lending terms, arrangement or valuation fees, early repayment charges and potentially new personal guarantees.
Any projected long-term tax benefit from incorporation should therefore be assessed against the immediate cost of CGT, SDLT, LBTT or LTT, VAT where relevant, and refinancing. Tax, legal and banking arrangements need to work together rather than being considered in isolation.
Five questions landlords should consider before April 2027
- Am I choosing a structure for future acquisitions, or transferring assets I already own?
- What will the new property income tax rates mean for my expected portfolio profits?
- How do personal and company ownership compare over the period I expect to hold and finance the properties?
- If I transfer existing properties, what is the full upfront cost once CGT, property transaction taxes, existing borrowing and refinancing are taken into account, and could any reliefs apply?
- How do my income needs, borrowing, reinvestment plans and succession objectives affect the answer?
Considering these questions ahead of April 2027 gives landlords time to make a well-informed decision based on the overall economics rather than reacting to the headline difference between personal and corporate tax rates.
How we can help
There is no single ownership structure that will be right for every landlord. Our tax specialists can help distinguish between the relatively straightforward decision to structure future acquisitions through a company and the more complex tax and commercial considerations involved in transferring an established portfolio.
We can model the longer-term position under personal and company ownership and, where an existing portfolio is being considered for transfer, assess the potential CGT reliefs, treatment of borrowing, property transaction taxes and refinancing implications.
If you own a larger portfolio, are planning further acquisitions or expect significant rental profits, the period before April 2027 provides an opportunity to model the options before making changes. Speak to your usual Azets adviser or get in touch with our tax team.
