Incorporation Decision: Key Numbers
The numbers that decide whether moving your portfolio into a Ltd company makes sense.
Cost & rate inputs
SDLT additional dwelling surcharge
Charged on transfer to Ltd Co (personal sale)
CGT residential (basic / higher)
Triggered on transfer if value > base cost
Corporation tax
Tiered by profit; mortgage interest fully deductible
Dividend tax (higher rate)
On extracting profits as dividends above £500 allowance
Legal & valuation fees
Per property, plus accountancy setup
BTL Ltd mortgage rate premium
vs equivalent personal BTL
Breakeven rules of thumb
1 – 2 properties, low gearing, basic rate
Usually NOT worth incorporating
3 – 5 properties, mortgaged, higher rate
Often borderline — model carefully
5+ properties OR additional rate taxpayer
Often worth it long term
New purchases (no SDLT/CGT cost)
Strong case from day one
Watch-outs
- Incorporation Relief (s162 TCGA) can defer CGT — but full portfolio must transfer as a "business".
- SDLT 5% can sometimes be mitigated via partnership routes (specialist advice essential).
- Mortgage redemption penalties can wipe out year-one savings.
- Extracting profits is taxed twice — corporation tax then dividend tax.
Always model both routes over 5-10 years with a property tax accountant before transferring.