Incorporating a property partnership: what changes for Stamp Duty and CGT?
If you run a genuine property partnership, moving it into a limited company can cost less Stamp Duty than transferring properties you own on your own, because of partnership relief. Capital Gains Tax is dealt with separately, through incorporation relief. Both depend on facts HMRC checks closely, so this page explains the rules for 2026/27 and the warnings HMRC has issued.
| Tax | Individual owners transferring to a company | A genuine partnership transferring to a company |
|---|---|---|
| Stamp Duty Land Tax (England and NI) | Charged on full market value, with the 5% company surcharge | Charged on market value reduced by the partners’ “sum of the lower proportions” (FA 2003 Sch 15), which can cut the charge substantially |
| Capital Gains Tax | Due on the gain at market value, unless incorporation relief applies | Same: incorporation relief can defer the gain if the whole business transfers for shares and you claim it |
| Main risk | The upfront tax bill | HMRC challenging whether a real partnership exists, or a scheme designed to avoid tax |
Is your property business really a partnership?
A partnership is the relationship between people carrying on a business in common with a view of profit (Partnership Act 1890 s.1). Owning property jointly, as joint tenants or tenants in common, does not of itself create a partnership, even if you share the rent (Partnership Act 1890 s.2).
Evidence that usually supports a real partnership
- A written partnership agreement setting out profit shares and who does what
- Partnership tax returns filed every year, with each partner reporting their share
- A partnership bank account used for rents and costs
- Partners actively running the lettings business together, not just owning the properties
- A track record built up over time, not a partnership created shortly before incorporating
| Situation | Likely treatment |
|---|---|
| Couple who jointly own two lets managed by an agent, no partnership returns | Joint ownership, not a partnership |
| Family who have run a hands-on letting business together for years, with partnership accounts and returns | Likely to be a partnership |
| Partnership formed shortly before incorporating to save Stamp Duty | Likely to be challenged by HMRC |
How does partnership relief reduce Stamp Duty?
When a partnership transfers property to a person connected with the partners, such as a company they own, Stamp Duty is charged on the market value multiplied by (100 minus the sum of the lower proportions) per cent (FA 2003 Sch 15 para 18).
- Identify the new owner: the company receiving the property.
- Identify the corresponding partners: the partners who are, or are connected with, the new owner (FA 2003 Sch 15 para 20).
- Work out each partner’s “lower proportion” from their share in the partnership and in the property after the transfer.
- Add them up. The higher the total, the lower the Stamp Duty.
In a simple case where a husband-and-wife partnership transfers its properties to a company they own between them, the sum of the lower proportions can reach 100%, which can reduce the Stamp Duty to nil. The calculation depends on each partner’s share and how the company is owned, so check it before relying on it. Scotland (LBTT) and Wales (LTT) have their own rules.
How does incorporation relief work for a partnership?
Incorporation relief (TCGA 1992 s.162) can defer the Capital Gains Tax when the partnership’s whole business is transferred to a company in exchange for shares. It does not cancel the gain: the gain is deducted from the base cost of the shares, so tax can arise when the shares are sold (HMRC CG65700).
| Condition | What it means in practice |
|---|---|
| The letting is a business | HMRC accepts this where the owners personally spend 20 hours or more a week on it, following the Ramsay case (CG65715) |
| All the business assets transfer | Every property and other business asset, except cash, goes to the company |
| Paid in shares | Any cash or loan account credited to a partner is taxed in proportion |
| Relief is claimed | For transfers on or after 6 April 2026, each partner claims by the first anniversary of the 31 January after the tax year of transfer (Finance Act 2026 s.39) |
The company’s base cost for the properties is their market value at the transfer. Full details: how to transfer property to a limited company.
What is HMRC warning landlords about?
HMRC has published “Spotlight” warnings about arrangements marketed to landlords. If an adviser proposes something similar, get a second opinion before you sign.
| HMRC warning | What it covers | HMRC’s view |
|---|---|---|
| Spotlight 69 | Using a Limited Liability Partnership (LLP) to transfer a property business to a company and save Capital Gains Tax | HMRC says the scheme does not work and users may face interest and penalties as well as the tax (GOV.UK) |
| Spotlight 63 | “Hybrid partnership” arrangements used by landlords to reduce tax on property income, Capital Gains Tax and Inheritance Tax | HMRC is challenging these arrangements (GOV.UK) |
Simon discusses these issues in the video at the top of this page and in the podcast episode above.
Checklist before incorporating a property partnership
- Confirm the partnership is real and documented: agreement, bank account, partnership returns.
- Check the business test for incorporation relief and keep records of the time you spend.
- Calculate Stamp Duty with and without partnership relief, property by property.
- Calculate the Capital Gains Tax that would be deferred, and what it means if you sell the shares later.
- Speak to a mortgage broker about company lending and early repayment charges.
- Diarise the incorporation relief claim deadline for each partner.
- Avoid any arrangement resembling the schemes in HMRC’s Spotlights.
For a costed recommendation, see our property incorporation tax advice service.
Frequently asked questions
Does owning a property with my spouse make us a partnership?
Not on its own. Joint ownership does not create a partnership; you need to carry on a business together with a view of profit.
Can partnership relief reduce Stamp Duty to nil?
In some cases, such as a partnership transferring to a company owned by the same partners in the same proportions. It depends on the calculation for your facts.
Do I need a partnership to get incorporation relief?
No. Incorporation relief depends on there being a business, whether it is run by one person or a partnership. The partnership matters mainly for Stamp Duty.
Is incorporation relief automatic?
Not any more. For transfers on or after 6 April 2026 it must be claimed.
What is HMRC Spotlight 69?
HMRC’s warning about schemes that use a Limited Liability Partnership to move a property business into a company to save Capital Gains Tax. HMRC says these schemes do not work.
About this page
Written and reviewed by Simon Misiewicz FCCA, ATT, MBA, Director, Optimise Accountants. Simon has invested in property since 2006 and leads a team of five ACCA-qualified accountants.
Last reviewed: 3 October 2026. Drafted with AI assistance; every figure and rule checked against legislation.gov.uk, HMRC manuals and GOV.UK, and reviewed by Simon before publishing.
This page is general information, not personal advice. Take advice before transferring any property.
Optimise Accountants is the trading name of OPTIMISE ACCOUNTANTS LIMITED, registered in England and Wales, company number 04856185. Registered office: Office 15 Bramley House 2a, Bramley Road, Long Eaton, Nottinghamshire NG10 3SX.
