Buy-to-Let Exit Strategy 2026/27: Sell, Incorporate or Hold?
Comparing the three main exit routes for a landlord whose buy-to-let is no longer profitable under Section 24 — selling and paying CGT, incorporating into a limited company, or continuing to hold.
Why Section 24 Forces the Decision
Since Section 24 was fully phased in, individual landlords can no longer deduct mortgage interest from rental income before calculating taxable profit. Instead, they calculate tax on the full rental profit (as if there were no mortgage interest at all) and then receive a 20% tax credit on the interest actually paid. For a higher-rate taxpayer with a heavily mortgaged property, this can mean paying more tax than the 40% or 45% rate would suggest, because the credit is capped at the basic rate regardless of what rate the landlord actually pays.
Worked example: a higher-rate landlord has rental income of £14,000 a year, mortgage interest of £8,000 and other costs of £2,000. Under the old rules, taxable profit would have been £14,000 − £8,000 − £2,000 = £4,000, taxed at 40% = £1,600. Under Section 24, taxable profit is calculated as £14,000 − £2,000 = £12,000, taxed at 40% = £4,800, less a 20% credit on the £8,000 interest (£1,600), giving a final tax bill of £3,200 — double the old-rules figure, even though the actual profit in the landlord's pocket (£4,000 before tax) hasn't changed.
Option 1: Sell and Pay CGT
Selling crystallises a known, one-off tax cost and ends any further exposure to Section 24, rental voids, maintenance costs or future rate rises. The trade-off is giving up future rental income and capital growth.
Worked example: a landlord bought a flat for £180,000 and it's now worth £280,000, giving a gain of £100,000. After the £3,000 annual exempt amount, £97,000 is taxable. As a higher-rate taxpayer, CGT is charged at 24%, giving a tax bill of £23,280 and net proceeds (before selling costs, estate agency and legal fees) of £256,720. Run your own numbers through the Capital Gains Tax Calculator to see the effect of your own gain and tax band.
Option 2: Incorporate Into a Limited Company
Moving a property into a limited company restores full mortgage interest deductibility against corporation tax, which is the main appeal for landlords with significant gearing. But the transfer itself is treated as a disposal at market value for personal CGT purposes — so unless incorporation relief applies, the landlord could face a CGT bill broadly similar to selling, plus SDLT on the company's "purchase" of the property (typically at standard rates plus the 5-percentage-point additional-property surcharge), while still ending up owning the asset only indirectly, through company shares.
Incorporation relief, which can defer the personal CGT charge, is generally only available where HMRC accepts the landlord is running a genuine property business — broadly meaning substantial personal time spent on management activities (not just using a letting agent) across a sizeable portfolio, not a single hands-off buy-to-let. This makes incorporation far more commonly used by landlords with four or more properties who actively manage them, rather than a single-property landlord.
Option 3: Continue to Hold
For a lowly-geared landlord — say a mortgage of £50,000 against a £280,000 property — the Section 24 restriction bites on a much smaller interest figure, so the real-terms tax increase is modest, and there may be little financial case for disturbing the position. Holding preserves ongoing rental income, defers any CGT liability, and keeps the option open to sell later, potentially after paying down the mortgage further to reduce Section 24's impact entirely.
Side-by-Side Comparison
| Factor | Sell now | Incorporate | Continue to hold |
|---|---|---|---|
| Immediate tax cost | CGT at 18%/24% on the gain | Personal CGT disposal charge (unless incorporation relief applies) + SDLT on transfer | None immediately |
| Ongoing mortgage interest relief | Not applicable — no longer owned | Full deduction against corporation tax | Restricted to 20% credit (Section 24) |
| Best suited to | Landlords wanting to exit the sector entirely | Larger, actively-managed portfolios (4+ properties) | Lowly-geared properties where Section 24's impact is small |
| Future capital growth | Foregone | Retained via company shares | Retained directly |
| Complexity and ongoing cost | Low once sold | Higher — company accounts, corporation tax returns, extraction tax | Low — status quo |
Working Out Which Route Fits Your Position
- Calculate your current effective tax rate on rental profit under Section 24 using the BTL Section 24 Calculator to see exactly how much the interest restriction is costing you each year.
- Model the CGT bill you'd face today with the Capital Gains Tax Calculator, and compare it against your best estimate of the CGT bill you might face in five or ten years if you continue holding and the property appreciates further.
- If you're considering incorporation, get a specialist accountant's view on whether your portfolio would likely qualify as a "business" for incorporation relief before assuming the CGT deferral is available — assuming it applies when it doesn't is one of the most expensive mistakes landlords make in this area.
- Factor in mortgage redemption penalties, new limited-company mortgage rates (typically higher than personal buy-to-let rates), and SDLT on incorporation, all of which reduce the apparent tax saving in the early years.
- Remember that "continue to hold" isn't a passive default — actively review the numbers every year or two, since a small portfolio can tip from marginal to clearly loss-making as interest rates or Section 24's cumulative effect change.
There's no universally right answer here — it depends on gearing, portfolio size, how actively you manage the properties, and how long you intend to stay invested in the sector. Running the actual numbers for your specific property through the calculators above, rather than relying on rules of thumb, is the only reliable way to choose.
Frequently asked questions
What is Section 24 and why does it push landlords towards an exit decision?
Section 24 restricts individual landlords to a 20% tax credit on mortgage interest, rather than deducting it in full against rental income, which can push a highly-geared landlord into paying tax on a loss-making property in real cash terms. This is the single biggest reason individual landlords review whether to sell, incorporate or keep holding.
What CGT rate applies if I sell a buy-to-let as an individual?
Individuals pay 18% CGT if they're a basic-rate taxpayer or 24% if they're a higher or additional-rate taxpayer on the gain, after deducting the £3,000 annual exempt amount. The rate that applies depends on your total taxable income including the gain, not just your salary.
Does incorporating a buy-to-let portfolio avoid CGT?
Not automatically. Transferring a property you personally own into a limited company is treated as a disposal for CGT purposes, so you'd normally be taxed as if you'd sold it at market value. Incorporation relief can defer this, but HMRC generally only accepts the letting activity qualifies as a 'business' for this relief where the landlord is genuinely hands-on and spends substantial time managing a sizeable portfolio, not for a single let-and-forget property.
Do limited companies still get full mortgage interest relief?
Yes. Section 24 only applies to individual landlords and partnerships of individuals; a limited company deducts mortgage interest in full as a business expense against its corporation tax bill, which is the main tax advantage that makes incorporation attractive for larger, more geared portfolios.
Is corporation tax lower than the tax I'd pay as an individual landlord?
It depends on your personal tax position. Corporation tax rates for most companies range up to 25% on profits above certain thresholds, and you'd still typically pay further personal tax (dividend tax or salary tax) when you extract profit from the company, so the comparison has to include both layers, not just the corporate rate.
What costs are involved in incorporating an existing portfolio?
Beyond any CGT charge on the personal disposal, you'll typically face SDLT on the transfer into the company (usually at standard, non-relieved rates plus the additional-property surcharge), mortgage redemption and new limited-company mortgage arrangement costs, and legal and accountancy fees, all of which need to be weighed against the ongoing tax saving.
Is simply continuing to hold ever the right answer?
It can be, particularly if the property is lowly geared (a small mortgage relative to value), since Section 24's impact is proportional to interest costs — a landlord with little or no mortgage is barely affected by the restriction and may be better off holding for continued capital growth and rental income than crystallising a CGT bill now.
How do I compare the three options on the same footing?
The fairest comparison looks at net cash position over a realistic holding horizon (for example five to ten years) under each route: net sale proceeds after CGT if you sell now, net position after incorporation costs plus the ongoing tax saving if you incorporate, and projected net rental profit plus eventual CGT if you keep holding as an individual.
Try the calculators
Buy-to-Let Calculator
Analyse the profitability of a buy-to-let investment including tax and costs.
Capital Gains Tax Calculator
Calculate Capital Gains Tax on property, shares and other assets for 2025/26.
BTL Section 24 Impact Calculator
Compare your buy-to-let tax position under old rules (pre-2017) versus current Section 24 rules where mortgage interest is no longer deductible.
Related reading
Buy-to-Let in a Limited Company UK 2026: Is It Worth the Extra Admin?
Section 24 has made personal buy-to-let more expensive for higher-rate taxpayers. But does a limited company actually save you money after corporation tax, extraction costs, and higher mortgage rates? A full 2026 comparison.
Buy-to-Let: Limited Company vs Personal Name in 2026/27
How mortgage interest relief, Corporation Tax and dividend tax compare against personal ownership and Section 24 for UK landlords in 2026/27.
Buy-to-Let Tax After Section 24: What Landlords Pay in 2026
Section 24 removed mortgage interest as a deductible expense for landlords. Higher-rate taxpayers now face far higher tax bills than they did before 2017. Here is exactly how the numbers work.