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Incorporation Relief No Longer Applies Unless You Claim It

ended 22. August 2026

Moving a sole trade or a property letting that amounts to a business into a company used to come with a safety net. Where the conditions were met, the part of the gain paid for in shares was rolled over into them by reducing their cost, without anyone having to ask. Anyone who did not want it elected out under section 162A of the Taxation of Chargeable Gains Act 1992. For transfers made on or after 6 April 2026, section 39 of the Finance Act 2026 requires a claim and abolishes the election.

The catch is what now happens to the person who does nothing. A relief that has to be claimed does not arrive by itself, so the gain is chargeable at the time of the transfer, not deferred. Relief on a business moved into a company in 2026-27 has to be claimed by 31 January 2029, and HMRC's own manual page on the conditions was still describing it as automatic until 20 August 2026, more than four months after the law changed.

The person caught is the sole trader who incorporated just after 6 April, on advice that was right until that day.

  1. Turning a relief that applied by itself into one that has to be asked for is a small change on paper. Is it a sensible tidying up of the rules, or a trap for the person who incorporates without an adviser?
  2. Who is hit hardest when a relief switches from automatic to claimed, and is it fair that silence is now the costly option?
  3. What should someone who moved their business into a company after 6 April 2026 be doing before the claim deadline, and what would make a change like this land more safely? Do you have a client whose plans this would change? If so, please give as much colour and detail as possible.

3 responses from the Newspage community

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Editor
Harvey DhillonVerified
Founder & CEO at Zmartly
It is not a tidying up of the rules, and HMRC's own impact note does not claim it is. The note expects experience to stay broadly the same, because the claim is submitted through Self Assessment. Being in Self Assessment is not the same as being told the rules have changed. It is a trap for the person who incorporates without an adviser, and nothing in the section that grants the relief lets HMRC accept a late claim. Hit hardest is the person nobody tells, and making silence the costly option isn't fair. The deadline runs off the tax year of the move, not the day of it, so a move in May 2026 and one in March 2027 both land on 31 January 2029. The claim goes in the return for the year of the move, and if the return has gone in without it, amending it normally still works right up to that day. HMRC should be writing to anyone who moved a business into a company since 6 April 2026, not assuming an accountant already has.
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Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
This is exactly the kind of tax change that looks harmless in legislation and brutal in real life. Yesterday, silence meant you got the relief. Today, silence can mean a tax bill.

I understand why HMRC wants better data, but shifting Incorporation Relief from automatic to claimed turns administration into a financial risk. The people most exposed are not sophisticated tax planners; they are sole traders and landlords who incorporated on advice that was perfectly correct before 6 April.

The real risk is the person who incorporated in April, thought the job was done, and now has no idea there is a separate claim sitting in the background. That is how people get caught not because they were aggressive with tax, but because a rule quietly changed underneath them.

And HMRC cannot really complain about taxpayers missing a change when its own manual was still describing the old position four months later. If the guidance is behind the law, the taxpayer should not be the only one carrying
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Editor
Mark AlexanderVerified
Founder at Property118.com
Turning Incorporation Relief into something that must be claimed while HMRC’s own manual continued to describe it as automatic created an entirely avoidable trap for otherwise compliant business owners. Anyone who incorporated on or after 6 April 2026 should now confirm that their adviser will make a valid section 162 claim before the deadline, rather than assume the relief will simply apply.