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

Landlord Faces £200,000 CGT Bill for £2.8m Director’s Loan Account

A landlord is preparing to pay approximately £200,000 in Capital Gains Tax (CGT) to HMRC in connection with a business incorporation, according to a report by Property118. The transaction would result in the landlord holding a director’s loan account of £2.8 million in the new company.

The case, highlighted in a LinkedIn post by accountant Alexandre Norian FCCA, involves a landlord opting to pay CGT now rather than deferring it, in order to access the director’s loan account without incurring dividend tax. The £2.8 million figure represents the landlord’s existing net value in the business, restructured in a new legal and accounting form.

Changes to Incorporation Relief

Property118 notes that, prior to 6 April 2026, Section 162 Incorporation Relief generally applied automatically if statutory conditions were met. After this date, HMRC guidance requires landlords to actively claim Incorporation Relief, specifying details such as disposals, relief amounts, assets, values, shares issued, and any other consideration.

Landlords now have the option to claim all, part, or none of the available relief, making the decision process more explicit. The report explains that Section 162 relief does not carry over the properties’ historic purchase costs into the company. Instead, the company is treated as acquiring assets at market value, and the relief reduces the base cost of the shares received by the landlord.

Implications for Letting Agents and Inventory Clerks

The creation of a director’s loan account allows landlords to withdraw capital as repayment of a genuine debt, rather than relying solely on salary or dividends. HMRC recognises that crediting a director’s loan account is a form of consideration other than shares, and provides worked examples of this process.

Letting agents and inventory clerks should be aware of these changes, as they may affect how landlords structure property business incorporations and manage tax liabilities.