The 2025 Autumn Budget introduced key changes across the property landscape.
Whilst it was widely rumoured that Stamp Duty would be abolished, capital gains tax would be payable on the sale of your primary residence, and there would be changes to national insurance payable on rental income, the Budget did not introduce these changes.
Instead, the Chancellor announced a separate tax regime for property income.
As of 6 April 2027, the Income Tax rates will increase by 2 percentage points across all bands - the basic rate will rise from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47%.
These changes were also introduced in relation to dividend and savings income, with the Income Tax rate payable on such income also increasing by 2 percentage points.
For property partnerships and individual landlords, these changes might make incorporation into a limited company increasingly more attractive.
Why does the change to property tax impact you?
The property tax payable will impact rental income received by landlords in their personal name across England, Wales and Northern Ireland.
This will lead to reduced profits and an increased tax burden for individual landlords or landlords operating as a partnership.
Furthermore, the tax payable on rental income will squeeze net yields for landlords holding properties in their personal names.
Incorporation as a solution: What do you need to know?
Not only does incorporation into a limited company bring limited liability for landlords and therefore reduce their overall risk, but it also introduces significant tax advantages.
The corporation tax for a limited company remains unchanged following the 2025 Autumn Budget and still sits at 25%.
This is significantly lower than the higher and additional rate of Income Tax payable on rental income.
Properties within a limited company are shielded from the personal property income tax rates, with the company paying corporation tax at a flat rate of 25% on its profits.
However, the changes introduced by the 2025 Autumn Budget are not the only advantages to incorporation. Other advantages include:
- A limited company offers its shareholders limited liability and they are shielded from personal liability for the company’s debts.
- The ability to deduct 100% of mortgage interest costs as a business expense, thereby lowering the profits on which corporation tax is payable.
- Profits can be retained in the limited company ,allowing for portfolio growth or reinvestment.
- A corporate structure can facilitate estate planning as shares in the company can be gifted thereby utilising Business Property Relief for inheritance tax purposes.
- Eligibility for rollover relief of Capital Gains Tax on the transfer of a business as a going concern, provided that the property portfolio is transferred in exchange for company shares.
- The applicability of special rules for partnerships transferring a property business to a limited company owned by the partners, resulting in no chargeable consideration and therefore no Stamp Duty Land Tax (SDLT) on the transfer.
Is incorporation right for you? Key considerations & pitfalls:
Incorporation is not a one-size-fits-all solution and there are a number of factors to consider before incorporating. Key considerations include:
Which tax band are you in?
Individuals in the higher or additional tax band should benefit from lower taxes on rental income, as the income will be taxed at 25% corporation tax rather than the new 42% or 47% personal income tax rates.
Do you have mortgages over your properties?
If properties are mortgaged, they will likely have to be refinanced, which adds to the cost of incorporation. On the positive side, landlords with highly geared portfolios and high mortgage interest costs can benefit by offsetting mortgage interest costs against income, thereby reducing the overall tax payable. This is not available where an individual holds the property.
Are you seeking long-term investment or immediate extraction of income?
Where a landlord is seeking long-term investment and expansion of a property portfolio, reinvesting funds into a limited company can be more efficient. If a landlord’s primary aim is to extract income, incorporation may not be as advantageous, as extracting funds from a limited company by way of dividends creates a second tax liability (corporation tax for the company and income tax for the landlord).
Size of Portfolio
Where a landlord has just one or two properties, the administrative burden and costs of operating a limited company may be disproportionate.
Are you a partnership?
SDLT relief may be available on the incorporation of a partnership property business where certain criteria are met, including the partners being able to demonstrate that there is a genuine partnership which has been in existence at least 3 years before the incorporation.
Why getting professional legal/tax advice is more important than ever
Given the upcoming changes and complexity, property owners should consider legal, accountancy and tax advice together in order to ensure a complete service.
Failure to seek the necessary professional advice might lead to misinterpretation of the relevant rules and costly rectification in the future.
Why Myerson is well placed to help
As a full-service law firm, Myerson is here to help.
At Myerson, our experienced Corporate, Residential Property and Commercial Property solicitors have assisted on a large number of property incorporations of varying complexities and are well experienced in this area.
If you are operating a property business and are considering restructuring your property portfolio through property incorporation, we would be delighted to guide you through the process, working closely with your tax advisers and accountants to ensure your company complies with the legislation.
Unsure how the 2025 Autumn Budget will impact you?
Our specialist solicitors are on hand to help you understand your position and evaluate whether incorporating your property business could reduce your tax exposure and improve long-term returns.
0161 941 4000
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Olivia Rollinson
Solicitor
Olivia is a corporate solicitor specialising in all aspects of corporate law, advising companies, directors and shareholders on a wide range of commercial matters. She graduated from BPP University with a distinction in both the Graduate Diploma in Law (GDL) and the Legal Practice Course (LPC), before completing a two-year training contract gaining broad experience across multiple practice areas.
Since qualifying, Olivia has advised on mergers and acquisitions, share schemes, loan agreements, corporate reorganisations and succession planning, regularly working alongside tax advisers and accountants. She also drafts and negotiates shareholders’ agreements and advises on corporate governance, delivering clear, practical and commercially focused advice tailored to each client’s objectives.
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