The Government has quietly rewritten the rules for one of the most important landlord tax reliefs in the UK. From 6 April 2026, Incorporation Relief under Section 162 TCGA 1992 will no longer apply automatically. Landlords will be required to actively claim the relief. This change appears in the Government’s policy paper titled “Capital Gains Tax: Incorporation Relief claims.”
The measure is included within the Budget 2025 tax-related documents collection, confirming the new treatment of incorporation relief.
The Government’s technical note confirms that the change comes into effect from 6 April 2026.This relief has been the backbone of many legitimate restructuring plans for years. It has allowed landlords to transfer a genuine property business into a company and defer Capital Gains Tax. The automatic nature of the relief has always been a central part of that process.
The Government has now confirmed that this will change. The measure is presented as a compliance improvement. No detailed explanation has been offered. The implications for landlords, accountants and solicitors are substantial. The fact that this change was buried so deeply raises questions about why it was not presented openly.
This article explains the change, why it matters and what landlords need to consider now.
What Incorporation Relief Does Today
Incorporation Relief under Section 162 TCGA 1992 allows a landlord to defer Capital Gains Tax when a property business is transferred into a company in exchange for shares. The relief applies when the rental activity meets the recognised test for a business, rather than a passive investment. Case law, activity levels and evidence of management decisions all play a part in establishing that status.
Under the current rules, incorporation relief applies automatically when the conditions in s162 are met. There is no separate claim process. The transfer is recorded on the tax return within the CGT section. Deferral is assumed unless HMRC challenges the basis of the claim.
This automatic mechanism has shaped landlord tax planning for many years. It has supported the movement of highly geared or Section 24-affected portfolios into a company structure. It has also formed part of long-term intergenerational planning through Family Investment Companies.
What Will Change From April 2026
The Government will shift incorporation relief from an automatic rule to a claims-based relief. The policy paper sets out that taxpayers must now actively claim the relief.
This adjustment may appear administrative on the surface. The practical consequences are more significant.
1. New deadlines will apply
Claims-based reliefs carry statutory deadlines. Late claims may be denied. This introduces new timing risks for landlords and advisers.
2. Evidence standards will rise
A claim must be supported by robust evidence that the business meets the necessary conditions. HMRC scrutiny may increase once the relief requires deliberate declaration.
3. Incorrect or omitted claims may trigger immediate CGT
Landlords who transfer property to a company after April 2026 could face an unexpected CGT bill if the claim is not made properly or is overlooked.
4. Advisory risk increases
Accountants and solicitors will face additional procedural duties. A claim-based system requires explicit advice and explicit compliance procedures.
5. Transactions will require more careful sequencing
Incorporation already demands careful planning around mortgages, valuations, lender consent and business substance. A claim step adds another critical stage that must be aligned with completion.