Landlords: You Must Now Claim Incorporation Relief Yourself

Tax Queen

Tax Expert @ Pie

3 min read

From 6 April this year, HMRC changed how Incorporation Relief works. If you're a landlord moving rental properties into a limited company, this relief is no longer given automatically. You now have to actively claim it on your Self Assessment tax return, and if you don't, you could be hit with an unexpected Capital Gains Tax bill, even though you haven't sold the property or received any cash.

Does This Affect You?

If you own rental property in your own name and you're planning to transfer it into a limited company (or you've already done so this tax year), this matters to you directly. It also matters if you're still deciding whether incorporating your portfolio makes sense, since the rules on qualifying just got a bit more involved.

If you have no plans to incorporate, you can relax, this change doesn't touch you. But it's worth understanding in case your circumstances change down the line.

What Is Incorporation Relief, and Why Does It Matter?

When you move a rental property into a limited company, HMRC treats it as though you'd sold the property at market value, even though no money has actually changed hands. That "sale" can trigger a Capital Gains Tax bill on any increase in the property's value since you bought it.

Incorporation Relief exists to soften that blow. Rather than making you pay CGT straight away, it defers the bill until you eventually sell the property (or your shares in the company). It's a genuinely valuable relief, particularly for landlords with properties that have gained a lot of value over the years, and it's worth understanding alongside the other allowable expenses landlords can claim on rental property income, since both affect how much tax you end up paying overall.

The problem is how you now get it. Previously, if you met the conditions, HMRC applied Incorporation Relief automatically. From this April, that's no longer the case. You have to make an active claim through your Self Assessment tax return. Miss it, and you could be facing a CGT bill you weren't expecting and may not have the cash to cover, since you never received sale proceeds in the first place.

As accountant Harvey Dhillon, founder of Zmartly, put it: turning an automatic relief into one you have to ask for is a "quiet trap" for landlords who assume everything's been handled.

If you moved property into a company this tax year, your claim needs to be in by 31 January 2029. That sounds like a long way off, but it's easy to lose track of a deadline that far out, so it's worth noting it now rather than relying on memory later.

Using self-assessment software that tracks your deadlines and prompts you for the right disclosures can take the pressure off remembering claims like this one yourself.

Who Actually Qualifies?

HMRC has also clarified how it decides whether you're genuinely running a property business, which is a condition for claiming the relief. As a general rule, HMRC will normally accept you're running a qualifying business if you personally spend at least 20 hours a week on relevant activities, things like dealing with tenants, arranging repairs, managing lettings, and handling the day-to-day admin of your portfolio.

Importantly, spending fewer than 20 hours a week doesn't automatically rule you out. HMRC says it will still look at the nature and extent of what you actually do. So if you assumed you didn't qualify because you're not putting in 20 hours a week, it may be worth checking again, the test has always been whether your activities amount to running a business, rather than simply holding an investment, and that fundamental test hasn't changed

Should You Move Your Properties Into a Company?

Incorporating isn't automatically the right move for every landlord. A limited company structure can be tax-efficient, particularly if you're a higher-rate taxpayer, since mortgage interest can generally be deducted as a business expense before corporation tax is worked out, unlike the restricted mortgage interest tax relief available to individual landlords, and profits can be retained in the company to fund future purchases.

But transferring properties you already own comes with real upfront costs, including potential CGT, legal and refinancing fees, and in England and Northern Ireland, stamp duty on the property's market value. For landlords with a small portfolio, particularly just one investment property, those costs can outweigh the benefit of incorporating. If you're weighing up a future property sale either way, it's worth understanding how Capital Gains Tax is calculated step by step so you know what you're working with.

That's why many landlords choose a middle path: keeping existing properties in their own name and only buying future properties through a limited company. It's also worth knowing that even once a property sits in a company, lenders usually still require directors to give a personal guarantee, so incorporating doesn't fully remove your personal exposure.

What to Do Next

If you're incorporating a rental property this tax year, don't assume Incorporation Relief will be applied for you, because it won't be. You'll need to actively claim it through your Self Assessment return, and get that claim in by 31 January 2029 if the transfer happened this tax year.

If you're weighing up whether to incorporate at all, it's worth speaking to an accountant about your specific numbers, since the right answer depends heavily on your portfolio size, growth plans, and how many hours you put into managing it.

Whichever stage you're at, keeping on top of Self Assessment deadlines and claims matters more than ever now that this relief requires action rather than assumption. Pie Tax is built to help landlords and other self-employed taxpayers stay ahead of exactly this kind of change, and you can see how Pie works. If you're ready to get your Self Assessment sorted properly this year, try Pie for free today.

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