How can you ensure a successful Incorporation process? Here, we share the top tips from tax expert Sean Hughes.
The Incorporation process can feel daunting and complex, but with expert support, it doesn’t have to be. Below are some of the top tips Sean Hughes, from Comprehensive Tax Planning, shared in our latest webinar ‘BTL Incorporation & Landlord Tax’.
1. Look at the benefits
Whilst it’s important to remember that Incorporation isn’t the right option for all landlords (speak to a professional tax adviser to find out the best route for you), it certainly offers a number of benefits.
These include:
- Full deduction for mortgage interest payments
- Lower overall tax liabilities (for eligible landlords)
- Reduced tax on the disposal of properties
- Opens the door for further inheritance planning to reduce exposure to Inheritance Tax
Furthermore, when going through the Incorporation process itself and transferring your properties from a partnership to a Limited Company, Capital Gains Tax (CGT) can be deferred, and Stamp Duty mitigation may apply, reducing upfront costs. By working with the tax experts at Comprehensive Tax Planning, you can maximise on these tax advantages.
2. Understand how Incorporation affects your portfolio
One of the main routes to Incorporation relief is running your portfolio as a partnership for a period of time before going through the process.
If you already have a partnership agreement, this shouldn’t impact your ability to get a mortgage when you Incorporate in the future. However, you will need to review your partnership agreement first, as the structure and ownership details may affect your ability to secure finance, depending on who is involved.
Pre-Incorporation, your mortgages will all be in your personal name. This means you’ll need to ‘purchase’ your properties into your Limited Company. In this instance, the deposit can be made from shares or a director’s loan instead of cash.
3. Look at the costs for the process
The Incorporation process can be expensive, so it’s essential to consider all the fees before getting started. These include:
- Expert tax advice – it’s important to find an advisor you trust so that you have confidence in your Incorporation
- Broker fees – as you’ll be refinancing your properties/portfolio, you’ll need to factor in your broker fees before getting started.
- Lender fees – another part of the mortgage costs is the lender fees, which will include admin, valuation, and product fees. Some lenders may merge these costs, so speak to us to see what the most cost-effective option is for your Incorporation
- Legal fees - as the seller AND the buyer of your properties (from your personal name to the Company), you will have to pay both fees
4. Understand the risks
Unfortunately, HMRC has recently investigated a number of different tax schemes in the market over their legitimacy. In some cases, landlords have unknowingly committed tax avoidance by following said schemes, leaving them liable to HMRC fines. As these have been completed in clients’ names, the onus is on them, NOT the tax advisor, to pay these charges.
It’s essential that you work with an expert you can trust when making tax decisions for your property portfolio. Ensuring your broker, tax advisor, and accountant all work together will help mitigate these risks and protect your property investments.
5. Consider Beneficial Interest Trusts (BICTs)
While Incorporation is the legal process of transferring your properties into a Company, a BICT is a trust where your properties are held for the tax benefits of an individual. Both options can be used in conjunction with the other to maximise a portfolio’s tax efficiency.
To simplify this, every property has:
- A legal owner—listed on the Land Registry and responsible for the mortgage.
- A beneficial owner—entitled to rental income and profits.
For most landlords, these roles are the same.
This allows the Company to become the beneficial owner, unlocking tax advantages such as Capital Gains Tax (CGT) and Stamp Duty benefits. Additionally, the trust can be structured so that a lower-rate taxpayer within the Company holds 100% beneficial ownership, while legal ownership remains split.
However, despite being a legal and widely used structure, lenders approach BICTs with caution. The biggest challenge arises during refinancing, as the property must be legally removed from the trust, which lenders treat as a purchase transaction rather than a standard remortgage.
Lenders are more risk-averse due to concerns surrounding a potential repossession. Since the Company receives rental income, there’s no rental section on the individual’s tax return, making it harder for lenders to assess affordability and recover funds if needed.
6. Explore all your options
For those who are not in a position to Incorporate, say you only have a small portfolio of properties or you spend less than 10 hours a week on your property business, there are other options to explore.
You can shift the weight of ownership to a lower-owning partner and set up a number of Company structures, such as a Layered Company.
From a lender's perspective, there are a few factors to keep in mind when exploring this route. For one, many will only allow a maximum of 4 directors on the company and any directors across the Layered structure must be involved in your mortgage application. Again, anyone with over a 25% shareholding within the Company structure must be involved in the application.
The key advice here is to work with a qualified tax expert. They can keep your Company structure as simple as possible, which will help speed up your application and make your lender more comfortable in the process.
Speak to the experts
As mentioned, working with a trusted tax expert and mortgage broker is the best way to ensure a seamless and professional Incorporation process.
Please note, MFB cannot give tax advice. Please speak to a professional tax expert before making any property investment decisions.
You can get in touch with Sean Hughes at Comprehensive Tax Planning here.
Next Steps
Our latest webinar, ‘BTL Incorporation & Landlord Tax: Your Questions Answered’, is now available to watch on demand! We brought together the experts to help you understand the Incorporation process and how it could boost your property portfolio.
To find out what’s right for you, it’s essential to get in touch.
For information about Limited Company mortgage finance, please submit an enquiry here or call us on 0345 345 6788.
If you need professional tax advice, please contact our partners at Comprehensive Tax Planning.
