A landlord is reportedly preparing to pay HMRC approximately £200,000 in Capital Gains Tax (CGT) now, according to accountant Alexandre Norian FCCA. This transaction is expected to result in a director’s loan account of £2.8 million within the new company.
This approach contrasts with the common desire among landlords considering incorporation to defer CGT. The £2.8 million loan account represents the landlord’s existing net value in the business, presented in a different legal and accounting form.
The stated 24% CGT rate for this landlord is considered plausible, though individual rates vary. For business transfers completed before 6 April 2026, Section 162 relief generally applied automatically. However, since 6 April 2026, HMRC guidance at CG65735 confirms that Incorporation Relief must now be actively claimed.
A director’s loan account in credit signifies money genuinely owed by the company to the director. Repayment of this debt is not treated as a dividend, which can be valuable for landlords planning long-term retirement drawings. The commercial case for paying CGT now is strongest when substantial personal drawings are anticipated, the company can generate or borrow the necessary cash, and the projected personal tax savings on future extraction outweigh the upfront cost.