Landlord tax rises in 2027: should you keep, sell or move your property into a company?

The Government proposes to increase income tax on rental profits to 24%, 44% and 49% from 6 April 2027. For landlords and people inheriting rental property, the change makes it worth revisiting the decision to retain, let or sell a home. However, transferring an existing buy-to-let into a limited company is not a tax-free shortcut: it can trigger substantial Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT).

What is changing?

The proposed rates for taxable rental income are:

Basic rate: 24%

Currently 20% — an increase of 4 percentage points.

Higher rate: 44%

Currently 40% — an increase of 4 percentage points.

Additional rate: 49%

Currently 45% — an increase of 4 percentage points.

Separate property income rates had already been scheduled at 22%, 42% and 47%. The October 2026 Budget proposed a further two percentage points, producing the figures above. Compared with rates currently applying to most individual landlords, the difference is four percentage points. The latest rates remain subject to enactment of the Finance Bill 2026-27.

The tax is calculated on taxable rental income, not simply gross rent. By illustration, if an entire additional £20,000 of taxable rental profit falls within the basic band, an increase from 20% to 24% is £800 a year before considering other changes to the taxpayer's position. Mortgage finance cost restrictions and the interaction with other income can materially alter the actual calculation.

The property income rates are proposed for England, Wales and Northern Ireland; Scottish arrangements should be checked separately.

Why probate landlords need to look carefully

An inherited property may produce rent while executors administer an estate. During that period, the personal representatives normally account for the estate's taxable rental income; the proposed property basic rate for estates is 24%, not automatically the individual beneficiary's higher or additional rate. Special rules can apply to distributions of estate income and to trusts, for which the proposed property trust rate is 49%.

A beneficiary who later takes ownership and lets the property in their own name may pay tax according to their own taxable income and property income bands. These are distinct stages, with potentially different consequences.

Importantly, the ordinary transfer of an estate asset directly to a beneficiary as part of administering the inheritance does not generally create a CGT disposal or SDLT charge merely because the beneficiary inherits it. A subsequent transfer by that beneficiary to their own company is a different transaction. The beneficiary's CGT base cost for a property inherited from the deceased is generally its market value at the date of death, subject to the applicable rules.

Would a limited company pay less tax?

Company profits are generally charged to Corporation Tax, currently 19% at the small-profits rate and 25% at the main rate, with marginal relief in between where applicable. Those rates are not the new personal property income tax rates. Companies may also have different finance cost treatment.

But the comparison must account for how the landlord eventually takes money out of the company, potentially incurring dividend or salary taxation, as well as annual accounts, administration, lending terms and future disposal of the property. A lower headline tax rate does not necessarily mean a lower overall tax bill.

1. Capital Gains Tax: a transfer can count as a sale at market value

Where a landlord transfers property to a company they control, the connected-person rules will generally treat the landlord as disposing of the property at market value, even if no cash changes hands or the company issues shares instead. CGT may therefore arise on the increase in value since acquisition, subject to allowable costs, reliefs and exemptions.

For individuals, the current CGT rates are generally 18% and 24%, depending on taxable income and the nature of the gain. Where a UK residential property disposal produces CGT payable, the reporting and payment deadline is normally 60 days from completion.

A landlord should not assume that Incorporation Relief removes the charge. Relief under section 162 of the Taxation of Chargeable Gains Act 1992 may be available where a genuine business, rather than merely a passive investment, is transferred as a going concern together with its assets (other than cash), wholly or partly in exchange for shares. Eligibility depends on the substance and extent of the activities. For transfers from 6 April 2026, HMRC requires a formal claim containing specified information. Even successful CGT incorporation relief does not, by itself, exempt the company from SDLT.

2. Stamp Duty Land Tax: the company may pay tax on full market value

For a property in England or Northern Ireland, section 53 of the Finance Act 2003 generally imposes SDLT using at least the market value where the property is transferred to a connected company. This is so even where the company pays little or nothing for it. Welsh property is subject instead to Land Transaction Tax, with its own rules.

Companies purchasing residential property normally face the higher SDLT rates for additional dwellings. For certain corporate purchases of homes worth more than £500,000, a 17% flat rate can be relevant, although relief may be available for a qualifying property rental business. The detailed facts and relief conditions matter.

An illustrative £500,000 transfer: Suppose an individual transfers a single residential buy-to-let in England, worth exactly £500,000, to a UK-resident company they control. Assuming the current higher residential SDLT rates apply and no special relief or surcharge changes the position, the company's SDLT would be:

• 5% on the first £125,000 = £6,250;
• 7% on the next £125,000 = £8,750;
• 10% on the remaining £250,000 = £25,000.

Total SDLT: £40,000, even if no cash is paid for the property. The individual may also have a CGT liability, depending on their acquisition value and available reliefs. Mortgage refinancing, legal costs and lender charges come on top. This illustration is not an estimate for any particular property.

3. Other costs and complications

A transfer commonly requires the existing lender's consent or repayment and new company borrowing; the available interest rate, fees and loan-to-value terms may be different. Leasehold property may require landlord or management company consents. Buildings held in companies can also fall within the Annual Tax on Enveloped Dwellings (ATED) regime above the relevant threshold, although relief is available in qualifying rental cases and filings may still be required.

Owners should be particularly cautious about marketed 'incorporation' or partnership structures promising to eliminate both CGT and SDLT. Genuine statutory reliefs exist, but they are fact-sensitive and cannot safely be assumed.

Retain, let, sell or incorporate: start with the figures

For an executor or beneficiary, the sensible first step is to establish a supportable market valuation, the property's realistic rental income, likely repairs and compliance costs, current tenancy position and any mortgage or estate liabilities. Only then is it possible to compare the net income from continued letting with the likely net proceeds of sale, or evaluate whether company ownership makes long-term sense.

There is no universal answer. A company may suit some long-term property businesses, but moving an established personally owned buy-to-let can involve significant upfront tax. Equally, an estate should not be hurried into selling simply because tax rates are changing.

How Hermens can assist

Hermens Property assists landlords, executors and beneficiaries across West London and Surrey with market valuations, rental appraisals, property inspections, sales, lettings and ongoing management. Our role is to provide grounded property-market evidence so owners and their professional advisers can make a considered decision.

To discuss the sale or letting potential of an inherited or investment property, contact Hermens Property at info@hermens.co.uk or visit hermens.co.uk.

This article is general information, not legal or tax advice. The April 2027 property income tax changes are proposed and subject to legislation. Tax and SDLT outcomes depend on the circumstances, ownership and any applicable reliefs; independent specialist advice is essential before a transfer. Arman Khosravi is a Partner at Oliver Fisher Solicitors and a director of Hermens Property. The businesses are separate, and clients are free to choose their solicitor, estate agent, accountant and other advisers.

Official sources

1. HMRC, Income Tax: changes to tax rates for property and savings income (29 October 2026).
2. HMRC, SDLTM30220: companies and the deemed market value rule.
3. HMRC, Higher rates of SDLT and SDLT corporate bodies.
4. HMRC, CG14560: transactions between connected persons, CG65715: incorporation relief and the meaning of business, and CG65735: incorporation relief claims from 6 April 2026.
5. HMRC, Dealing with an estate: managing and selling assets and HS282: death, personal representatives and legatees.
6. HMRC, Corporation Tax rates and allowances.

Information checked 10 November 2026.