BTL incorporation break-even — full vs hybrid
Full incorporation transfers your existing properties into an SPV, triggering SDLT at market value. Hybrid structure leaves the existing portfolio personal and routes new purchases through a new SPV. This calculator compares both routes and recommends which fits your profile.
Your current portfolio
Your tax position
Future acquisitions
Advanced (optional)
Current annual Section 24 cost
£15,456
Across 4 properties. This is the tax you pay each year because of the Section 24 interest restriction.
Option A — Full incorporation
Break-even: year 23.0
Option B — Hybrid (SPV for new acquisitions only)
Break-even: year 0.9
Recommendation
Don't full-incorporate — use hybrid for new buys
Full-incorporation break-even is too long to make commercial sense. The structurally right move is to leave existing properties personal and buy any further acquisitions through an SPV. Re-evaluate in 2-3 years as the portfolio grows or if rates change.
Notes on the calculation
SDLT is the dominant cost, and it's non-negotiable. Transferring existing properties into your SPV incurs full SDLT at market value plus the 5% company-purchase surcharge. On a 4-property portfolio averaging £500k, that's roughly £160,000 of SDLT before any legal or refinancing costs. This is the single biggest reason full incorporation rarely makes sense below portfolio size 4–5.
s162 TCGA 1992 incorporation relief defers the CGT, not the SDLT. Where you qualify as a "business" under the Ramsay v HMRC test (typically 20+ hours a week of personal management activity), the accrued CGT on transfer rolls into the base cost of your new SPV shares rather than being paid upfront. SDLT is unaffected. Partnership SDLT relief under FA 2003 Schedule 15 can help, but only where a genuine partnership has been in place for 2+ years before incorporation — HMRC actively challenges "paper partnerships" set up shortly before.
The hybrid structure is the unsung hero of portfolios in the 3–6 range. Setting up an SPV to buy your next property — while leaving existing ones in personal name — triggers no CGT, no connected-party issues, and no transfer SDLT. The only incremental cost is SPV setup (~£2,000) and the ongoing 0.5–0.9% mortgage rate premium. Break-even on the new property alone is usually inside 2 years. When the portfolio grows to 7+ properties and the existing-portfolio economics shift, full incorporation can then be revisited as a separate decision.
The SPV rate premium is the swing variable. SPV BTL mortgage rates typically sit 0.5–0.9% above personal BTL products, though for strong covenants (corporate tenants, low LTV, established portfolios) the premium can drop to 0.1–0.3%. The default in this calculator is 0.7% (typical) — adjusting it to your actual lender's terms can move the break-even figure by 3–8 years. A specialist's actual incorporation model uses current lender quotes rather than generic assumptions.
Considering incorporation?
s162 qualification is the make-or-break issue.
Getting incorporation relief depends on evidenced active management — time logs, contractor correspondence, decision records. HMRC does not give clearance; specialists build the evidence file in the 6–12 months before transfer. Get this wrong and the CGT that s162 would have deferred becomes payable on the full portfolio gain.
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