Transferring personally owned property into a limited company is a popular strategy among UK landlords, particularly since the introduction of Section 24 mortgage interest restrictions. While incorporation can offer long-term tax benefits, it’s essential to understand the costs involved before making the switch.

Below, we break down the main costs to consider:

1. Stamp Duty Land Tax (SDLT)

When you transfer property into a limited company, SDLT is usually payable as if the company were buying the property from you at market value.

• Additional surcharge: If the property is residential, the higher rates typically apply.
• Linked transactions: If multiple properties are transferred, they may be treated as linked transactions for SDLT purposes.
• Relief: In some cases, incorporation relief may reduce or defer SDLT if the properties are part of a genuine business (e.g. a partnership structure).

💡 Tip: Always obtain a professional SDLT calculation to avoid unexpected bills.

SDTL Rates

2. Capital Gains Tax (CGT)

For tax purposes, HMRC treats the transfer as if you sold the property to the company at market value, even if no money changes hands.

• CGT is due on the difference between the original purchase price (plus costs) and the current market value.
• The gain may be reduced by Private Residence Relief (if applicable) or other available reliefs.
• If the property is part of a genuine property business, Section 162 Incorporation Relief may allow you to defer CGT by rolling the gain into the base cost of the company’s shares.

Capital Gains on Property

3. Mortgage & Financing Costs

If your property is mortgaged, you’ll usually need to refinance into a limited company mortgage.

• Company mortgage rates are typically higher than personal rates.
• There may be early repayment charges, arrangement fees, broker fees, and valuation costs.
• Lenders will assess affordability based on the company’s projected rental income.

4. Legal & Professional Fees

• Solicitor’s fees: Required to transfer legal ownership and handle SDLT submissions.
• Valuation fees: Needed to establish market value for SDLT and CGT calculations.
• Accountant fees: For tax advice, incorporation planning, company setup, and post-transfer bookkeeping.

These costs vary depending on complexity but typically range from £1,000 – £5,000+ for a standard portfolio.

5. Ongoing Company Costs

Once properties are held in a limited company, there are additional compliance and administrative responsibilities:

• Annual accounts and corporation tax returns
• Companies House filing fees
• Payroll or dividend administration if extracting profits
• Potential tax on extracting funds personally

Summary

Transferring property into a limited company can offer significant long-term tax planning benefits, but it comes with short-term tax costs and practical implications. SDLT, CGT, refinancing costs, and legal fees must all be carefully considered and budgeted for.

Getting expert tax advice is essential to structure the transfer correctly and maximise any available reliefs.