Transferring property from personal ownership to a limited company is treated as a disposal for CGT purposes. HMRC views this as selling the property to your company at market value, even if no money actually changes hands.

This means you'll face a CGT bill on any gain made since you originally bought the property. Here's how to calculate exactly what you'll owe.

The Basic CGT Calculation

The CGT calculation follows this formula:

  • Market value at transfer (what the property is worth now)
  • Minus: Original purchase price
  • Minus: Allowable costs (legal fees, stamp duty, improvement costs)
  • Minus: Annual CGT allowance (£3,000 for 2025/26)
  • Equals: Chargeable gain

The chargeable gain is then taxed at either 18% or 28% depending on your total income for the tax year.

Step-by-Step Calculation Example

Let's work through a real example. Sarah bought a BTL property in Manchester for £180,000 in 2018. She paid £2,500 in legal fees and stamp duty. The property is now worth £280,000.

Step 1: Calculate the gross gain
Market value: £280,000
Original cost: £180,000 + £2,500 = £182,500
Gross gain: £280,000 - £182,500 = £97,500

Step 2: Deduct annual allowance
Chargeable gain: £97,500 - £3,000 = £94,500

Step 3: Apply CGT rate
If Sarah's total income keeps her in basic rate: £94,500 × 18% = £17,010
If she's a higher rate taxpayer: £94,500 × 28% = £26,460

Which CGT Rate Applies?

The CGT rate depends on your total taxable income for the year, including the capital gain:

  • 18% rate: If your income plus the gain stays within the basic rate band (£50,270 for 2025/26)
  • 28% rate: If your income plus the gain pushes you into higher rate territory

This can create a cliff edge effect where part of the gain is taxed at 18% and part at 28%.

Allowable Costs You Can Deduct

You can reduce your chargeable gain by deducting these allowable costs:

  • Original purchase price and associated legal fees
  • Stamp duty paid on purchase
  • Capital improvements (not repairs) - extensions, new kitchens, structural work
  • Legal and professional fees for the transfer to your company
  • Valuation fees for establishing market value

Keep detailed records of all costs. Repair and maintenance expenses don't count - only costs that permanently improve the property's value.

Market Valuation Requirements

HMRC requires you to use the property's market value at the time of transfer, not what you originally paid. You'll typically need:

  • A formal RICS valuation for properties worth over £250,000
  • Estate agent valuations for lower value properties
  • Recent comparable sales in the area

The valuation cost is itself an allowable expense that reduces your CGT bill.

Multiple Property Transfers

If you're transferring multiple properties to a company, each property is treated as a separate disposal. However, you only get one £3,000 annual allowance to set against all gains in the tax year.

Consider the timing carefully. Transferring properties across two tax years gives you two annual allowances (£6,000 total) but may delay the benefits of incorporation.

Planning to Reduce the CGT Bill

Several strategies can help minimise your CGT liability:

Timing the transfer: If you're close to the basic rate threshold, consider timing the transfer for a year when your income is lower.

Spouse transfers: Transfer property to your spouse first (no CGT between spouses) then have them transfer to the company using their annual allowance.

Phased incorporation: Transfer properties over multiple years to use annual allowances effectively, though this may not suit all situations.

Company Purchase vs Transfer

Remember that you don't have to transfer existing properties to benefit from company ownership. Having your company purchase new properties avoids CGT entirely on future acquisitions.

Many landlords keep existing properties personally and use companies for new purchases, especially when the CGT bill would be substantial.

Getting Professional Help

CGT calculations can become complex, particularly with multiple properties or when planning timing strategies. The interaction between income tax, CGT, and company tax rules requires careful analysis.

Consider speaking to a specialist property accountant who can model different scenarios and help you understand the full tax implications before making any transfers.