Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property118. Read the original article for full details.

HMRC Updates 20-Hour Guidance on Landlord Incorporation Relief

HMRC has amended its published guidance on the 20-hour test for landlord Incorporation Relief, confirming that landlords spending fewer than 20 hours a week on property activities may still be considered to be carrying on a business for tax purposes. The change to HMRC’s Capital Gains Manual was published on 20 August 2026, following an open letter from Property118 requesting clarification.

The update to section CG65715 of the Capital Gains Manual clarifies HMRC’s approach where fewer than 20 hours a week are spent on property activities. HMRC’s manual now states that cases involving less than 20 hours should be considered carefully, as such activities “may still be considered a business for section 162 purposes.” Officers are instructed to establish the facts and consider wider business factors before deciding if a business exists.

The 20-hour figure has been referenced for years as though it was HMRC’s minimum requirement for property rental activity to qualify as a business, despite there being no such numerical test in section 162 of the Taxation of Chargeable Gains Act 1992. The Upper Tribunal has also never created a statutory minimum hour requirement.

HMRC’s guidance continues to advise that Incorporation Relief should be accepted where an individual spends 20 hours or more each week on activities indicative of a business. However, the updated guidance makes clear that spending fewer than 20 hours does not automatically disqualify a landlord from being considered as running a business. The underlying question remains whether the activities, when considered as a whole, amount to a business.

This clarification follows Property118’s open letter to HMRC, published on 22 July 2026, which raised concerns about the interpretation of the 20-hour guidance by landlords and advisers. Property118 noted that the 20-hour figure had become an unofficial statutory test, despite no such requirement existing in law.

The update is significant for landlords, letting agents, and professional advisers, as it confirms that there is no statutory minimum number of hours required for Incorporation Relief. Instead, HMRC officers are directed to consider the full scope and substance of the landlord’s activities.