Incorporation or transfer to an SPV: tax steps, reliefs, and lender considerations

If you are building a property portfolio (or already have one), it is completely normal to reach the point where you ask: should you keep buying personally, or should you move everything into a limited company SPV?

Sometimes incorporation is the right move. Sometimes it creates a big tax bill for little benefit. And sometimes the “best” structure on paper falls apart the moment your lender says no.

This guide walks you through the practical decision: what an SPV is, what “transfer” really means, what taxes and reliefs you need to consider, and the lender points that typically catch people out.

If you want a quick baseline before you start, FHP’s view on the pros and cons is covered in Should I transfer my property into a limited company?.

What counts as an SPV (and why lenders care)

An SPV (special purpose vehicle) is usually a simple limited company set up only to hold investment property. It is not a trading company. It is not a construction company. It exists to buy, hold, and rent property.

Lenders like SPVs because the story is clean: they can see rental income going in, property costs going out, and nothing else muddying the water. FHP’s own landlord-focused guidance highlights that lenders generally prefer SPV structures because they show clear investment intent and separation from other activity. 

In practice, many buy-to-let lenders restrict limited company applications to specific SIC codes. For example, The Mortgage Works sets out accepted SIC codes such as 68100, 68201, 68209, and 68320 for SPVs. 

If you set up the company with the wrong activities (or you add extra trading codes later), you can make mortgage approvals harder than they need to be.

Incorporation vs buying new stock in an SPV: they are different decisions

There are 2 common routes:

1) You start a new SPV and buy future properties in it

This is the simpler route. You do not trigger tax on your existing portfolio because you are not transferring it. You are just changing the structure for new purchases.

2) You transfer existing personally-held properties into an SPV

This is where the complexity sits. A transfer is not a “paper move”. From HMRC’s perspective you are usually disposing of the properties personally and the company is acquiring them. That can bring in:

• Capital Gains Tax (CGT) personally
• Stamp Duty Land Tax (SDLT) for the company (often based on market value if connected)
• Mortgage changes (often a full remortgage)
• Legal conveyancing and lender consent

Before you do anything, get a proper model. A lot of people only compare “income tax vs corporation tax” and miss the upfront costs that can take years to recover.

If you want a structure-first overview, FHP’s wider planning article is useful: Tax planning for property investors: structures, reliefs, and pitfalls.

The tax picture: what changes when you operate through an SPV?

1) Mortgage interest: personal restriction vs company deductibility

For individuals, mortgage interest relief on residential property is restricted (the “Section 24” rules). HMRC’s guidance makes clear the restriction applies to individuals and that companies carrying on a property business are not affected.

That does not automatically mean incorporation is right for you, but if you are a higher-rate taxpayer with significant borrowing, the difference can be material.

2) Corporation Tax rates and how they actually apply

Company profits are subject to Corporation Tax, not income tax. From 1 April 2023 the main Corporation Tax rate increased to 25%, with a small profits rate of 19% and marginal relief between thresholds.

This matters because:

• You may pay less tax inside the company compared with personal tax rates, but
• You still need to think about how you take money out (salary/dividends/loan account), and
• Your personal tax position does not disappear, it just shifts.

If you want help keeping the compliance side clean, the service page Company tax returns is a good starting point.

 

The big 2 “transfer taxes”: CGT and SDLT

If you transfer existing properties into a company you control, you need to focus on CGT and SDLT first, because these are the costs that can make or break the decision.

Capital Gains Tax: incorporation relief may be available, but the conditions matter

“Incorporation relief” is based on Section 162 TCGA 1992. In simple terms, it can roll the gain into the value of the shares you receive, so you defer CGT rather than paying it immediately. The legislation applies where a person transfers a business as a going concern to a company. 

Two practical points:

1. It is not designed for “I have 1 rental and I want to save tax”. It is aimed at a genuine business transfer.
2. The devil is in what counts as a “business” and what counts as “going concern” in a property context.

There is also an important development to be aware of: the government set out proposals (Finance Bill 2025–26) to change the process so that incorporation relief would need to be claimed in the return for the year of transfer, rather than relying on it being automatic.
So you want your paperwork and reporting to be tight, and you do not want to leave this to chance.

Stamp Duty Land Tax: often payable even when you “transfer to your own company”

SDLT is frequently the shock cost. In many connected-party transfers, SDLT is calculated on market value, and higher rates can apply depending on the property and circumstances.

There are niche situations where landlords try to argue for SDLT relief using partnership structures, but HMRC has been very clear about challenging marketed schemes in this area. HMRC Spotlight 69 specifically flags arrangements involving LLPs to incorporate a property business in an attempt to reduce CGT, and it is a warning worth taking seriously.

The practical takeaway: if anyone is selling you a “guaranteed” SDLT-free incorporation via a fancy structure, treat it as a red flag until proper advice confirms it is genuinely applicable to your facts.

A sensible decision framework before you move anything

Here is the decision framework we recommend you work through before you pay for valuations or instruct solicitors.

Step 1: Why are you incorporating?

Be honest about your drivers. Most landlords incorporate for 1 (or more) of these reasons:

• Mortgage interest restriction personally (Section 24 impact)
• Reinvestment plans (leaving profits inside the company)
• Ownership planning (shares are easier to split than property titles)
• Portfolio growth and refinancing strategy

If your plan is to take every penny out of the company each year for personal living costs, the tax benefits usually look smaller once you account for extraction tax.

Step 2: What is the “payback period”?

Model:

• Upfront taxes (CGT, SDLT)
• Remortgage fees and legal costs
• Higher limited company mortgage rates (sometimes)
• Ongoing accountancy costs (accounts, Corporation Tax, payroll if relevant)

Then compare that to annual tax savings.

This is where good records matter. If your historic cost base and improvement costs are messy, CGT calculations become slow, expensive, and risky. It is one reason FHP pushes strong foundations like rental income bookkeeping and Xero bookkeeping.

Step 3: Check your mortgages before you assume anything

Most lenders do not allow you to “transfer” a mortgage to a new company. In reality you are often looking at:

• A sale from you to the company, and
• A new mortgage application in the company’s name

Which means affordability, stress testing, and product availability matter.

Lender considerations: the things that delay (or derail) SPV plans

1) SIC codes and “clean” company activity

As above, many lenders only lend to SPVs with specific SIC codes. The Mortgage Works lists accepted SIC codes for SPVs, including 68100, 68201, 68209, and 68320.

If you want broad lender access, keep the company’s activity simple and consistent with property investment.

2) Stress testing and Interest Cover Ratio (ICR)

Buy-to-let lenders usually test affordability using an Interest Cover Ratio. Guidance aimed at landlords commonly references ICR testing around 125% and sometimes up to 145%, depending on factors such as taxpayer position, product, and lender appetite. 

This matters because:

• Your borrowing capacity may change when you move from personal to limited company borrowing
• Your choice of product term (for example, longer fixes) can affect the stress rate applied

3) Personal guarantees and director profiles

Even with a limited company mortgage, you should expect:

• Personal guarantees from directors
• Checks on your personal income and broader portfolio
• Scrutiny of company accounts once the SPV has trading history

You will also need clean annual accounts and timely filings. If you are running multiple properties and want it to feel controlled rather than chaotic, annual statutory accounts support can take that load off your plate.

Tax “steps” checklist: what a well-run transfer usually looks like

Every case is different, but a controlled process tends to follow this order.

1) Pre-transfer review (the most important stage)

You (and your accountant) should pull together:

• Property list, purchase dates, purchase costs
• Improvement costs (with invoices where possible)
• Current market values (estate agent appraisals or valuation approach)
• Current mortgage balances and ERCs
• Your personal tax position now, and expected position next 2–3 years

This is when you sanity-check whether incorporation relief might be relevant, and you model worst-case CGT and SDLT.

2) Company formation and compliance setup

Set up the SPV properly:

• Correct SIC codes
• Share structure
• Director appointments and confirmations

Companies House compliance is only getting more serious over time. FHP has also covered upcoming identity verification requirements for directors, which is worth having on your radar if you are setting up new entities. Director ID verification rules

If you want someone to keep filings and statutory admin tidy, company secretarial services can be a sensible add-on.

3) Mortgage route planning

You need to know early whether you are:

• Remortgaging into the SPV
• Using a specialist limited company lender
• Holding some properties personally and moving others

It is often not “all or nothing”. Sometimes the answer is to leave low-mortgage (or unmortgaged) properties personal, and acquire future properties in the SPV.

4) Legal transfer and completion

A property transfer is a legal conveyancing process. Budget for:

• Solicitor fees
• Land Registry fees
• Lender requirements
• Completion timelines (which may not match your tax year plans)

5) Accounting setup: keep the SPV clean from day 1

If you treat the SPV like a proper business from the start, everything gets easier:

• Separate bank account
• Consistent bookkeeping
• Clear director loan account tracking (if you introduce funds)
• Regular reporting

If you use Xero, build the system properly and automate what you can. Start with Xero bookkeeping basics and consider workflows like automations in Xero so you are not manually chasing paperwork every month.

Reliefs and planning angles you should know about (without getting sold a “scheme”)

A few legitimate planning angles come up a lot:

Incorporation relief (CGT deferral)

As covered, incorporation relief can defer CGT where the conditions are met. The key is whether what you do is genuinely a business transfer under the rules.

Timing and documentation

Because the government has proposed changes around how incorporation relief is claimed and evidenced, your record-keeping and reporting matters more, not less.

Avoidance “packages” dressed up as planning

HMRC Spotlight 69 is a clear warning on marketed LLP-based schemes aimed at landlords incorporating property businesses to sidestep tax.
The risk is not just tax. It is time, stress, fees, and the possibility of HMRC action later.

The safe position is simple: keep it commercial, keep it evidenced, and make sure the structure matches what you genuinely do.

Other practical considerations landlords forget

Making Tax Digital and reporting obligations

Your compliance obligations differ depending on whether you hold property personally or through a company. And HMRC’s MTD rollout for income tax is changing the way many landlords report and keep records. FHP notes that from April 2026, those with qualifying income over £50,000 will need to keep digital records and submit quarterly updates.

If you are still running rental records on spreadsheets and loose receipts, that is a headache waiting to happen.

A good starting point is Making Tax Digital for landlords so you can see what the practical change looks like.

Cash flow and “trapped” profits

In a company, you can often reinvest more easily because profits can stay inside the business after Corporation Tax. But if you need the money personally, you still need to extract it, and that changes the overall tax result.

This is why you should model your real-life behaviour, not the best-case theoretical scenario.

When incorporating into an SPV tends to make sense

You often see SPVs work best when:

• You are a higher-rate taxpayer affected by mortgage interest restriction personally 
• You plan to grow the portfolio and reinvest profits
• You want a structure that lenders recognise (correct SIC codes, clean activity) 
• You can manage (or outsource) company compliance properly

For many landlords, it is not a “tax trick”. It is a growth structure.

If you want the broader landlord journey context, FHP’s Landlord growth playbook is a helpful read.

When you should slow down (or choose a different route)

You should pause and get the numbers checked if:

• The portfolio has large gains (CGT risk)
• Properties are heavily mortgaged with large early repayment charges
• SDLT would be high enough to wipe out years of future savings
• Your lender options look limited due to company structure or affordability
• Someone is pushing a “scheme” rather than straightforward planning

Sometimes the right answer is:

• keep existing properties personal, and buy new ones in an SPV
• restructure ownership without transferring the bricks and mortar
• or tidy the portfolio first (refinance, sell underperformers, then incorporate later)

Want to know if an SPV transfer works for your numbers?

If you are weighing up incorporation or transferring to an SPV, the best next step is a proper, property-by-property review. You want to know the likely CGT and SDLT impact, whether incorporation relief is realistic in your situation, and what your lender options look like before you commit.

Speak to FHP Accounting via Contact Us and we will help you map the tax steps, reliefs, and lender considerations in a way that fits your portfolio and your goals.