UK Incorporation Relief Claim 2026/27: Section 162 Changes

From 6 April 2026, a person transferring a business to a company must make a claim for Incorporation Relief if they want relief under the new Section 162 process. This is a material change from the earlier position, where the relief generally applied automatically when the statutory conditions were satisfied.

Incorporation Relief can defer Capital Gains Tax when a sole trader, partner or qualifying trustee transfers a business and its assets to a company in exchange for shares. The gain is not simply erased: the relief normally reduces the tax cost of the shares, so the deferred gain can matter when those shares are later disposed of.

What is Incorporation Relief?

Incorporation Relief is a Capital Gains Tax relief for an eligible transfer of a business to a company. The usual pattern is a sole trader or partnership transferring a business and its assets, other than cash, in exchange wholly or partly for shares in the company. If the conditions are met, some or all of the gain can be deferred rather than taxed immediately.

The relief is about the transfer of a business, not merely the sale of an isolated asset to a company. The underlying business activity, assets, consideration and ownership need to be reviewed together. A property investment activity, a business with substantial non-business assets or a transfer with significant cash consideration may require a particularly careful analysis.

The relief also does not turn the company into the same taxpayer as the individual. The company has its own Corporation Tax, accounting and record-keeping obligations, while the transferor has the Capital Gains Tax and Self Assessment questions.

What changed from 6 April 2026?

For a transfer made on or after 6 April 2026, the transferor must make a claim to obtain Incorporation Relief. HMRC says the claim will normally be made in or with the Self Assessment return for the tax year of transfer. The legislation requires the claim and HMRC's manual explains that the claimant will need to provide details such as the transaction, tax computations and the type of business transferred.

This creates two separate questions:

1. Does the transfer qualify? The Section 162 conditions still apply.
2. Was the claim made correctly and on time? The return must include the required claim and supporting information under the current process.

Do not carry the old “automatic relief” workflow into a 2026/27 transfer. Conversely, do not assume that a transfer before 6 April 2026 requires the new claim merely because the tax return is filed after that date.

Who makes the claim?

The claimant is the transferor whose business is transferred to the company. This may be an individual sole trader, a partner in a partnership or a trustee where the relevant conditions apply. The company receiving the business does not make the transferor's personal Incorporation Relief claim simply because it issues shares.

Where several people transfer interests in a business, each person's tax position and return may need to be considered separately. The share consideration, ownership, gain and claim details should reconcile across the transfer documents, company records and each relevant Self Assessment return.

What information should be prepared?

Before completing the return, assemble a transaction file that explains what was transferred and how the relief computation was reached. It should normally include:

• the transfer date and the tax year in which it falls;
• the business activity and evidence that it was operated as a business;
• the assets and liabilities transferred, including goodwill and any retained assets;
• the consideration received, separating shares from cash or other consideration;
• the market value and tax cost of relevant assets;
• the number and class of shares issued by the company;
• the Capital Gains Tax computation and any chargeable or non-chargeable elements; and
• the claim wording and information required by the current return or HMRC guidance.

The exact evidence depends on the facts. A valuation, transfer agreement, board minutes, share issue records, accounts and asset schedules can be important, but none of them alone proves that the statutory conditions are satisfied.

Does receiving cash remove the relief?

Not necessarily, but cash consideration can create an immediate taxable element. Where a transferor receives both shares and cash, the share and non-share consideration must be analysed under the applicable rules. The cash proportion may not receive the same deferral as the share consideration, and the computation should not treat the entire gain as deferred without checking the legislation and current HMRC guidance.

The same caution applies to directors' loans, assumed liabilities, preference shares and arrangements that are described commercially as a share exchange but contain other consideration. Classify the consideration from the legal documents and the tax computation rather than relying on a headline description.

How does the claim relate to Self Assessment?

The claim is linked to the Self Assessment return for the tax year in which the business transfer takes place. It is not a separate claim that can be left entirely outside the return, and it is not the same as a later claim when the replacement shares are sold.

Use the current Self Assessment filing guidance for the return process and deadlines, then check the current Incorporation Relief instructions for the relevant tax year. Keep a copy of the submitted claim, computation and supporting documents with the transfer records.

The general GOV.UK page may still use simplified language about automatic relief for older or general cases. For a transfer from 6 April 2026, follow the current claim requirement in the Finance Act, HMRC manual and tax-year return guidance.

Common mistakes to avoid

• applying the pre-6 April 2026 automatic-relief workflow to a later transfer;
• assuming that incorporating a trade is enough without testing whether a business was transferred;
• claiming on the company's return instead of the transferor's Self Assessment return;
• treating cash, loans or assumed liabilities as if they were automatically share consideration;
• omitting goodwill, retained assets or liabilities from the computation;
• using the company incorporation date without checking the actual business-transfer date; and
• treating the claim as proof of eligibility rather than a procedural requirement.

The new process makes contemporaneous records more valuable. Resolve the transfer valuation, asset list, share issue and tax computation before the return is submitted, especially where the company has multiple shareholders or the business contains property, intellectual property or mixed-use assets.

Frequently Asked Questions

Evidence and decision checks

A reliable uk incorporation relief claim 2026 27 review starts by fixing the tax year and the date on which the relevant event happened. Record the person's or business's status, the income or transaction category, the amount before tax, tax already withheld, and any election or claim being relied on. Do not combine a headline figure with a final liability: the result can change when another income source, a payment date, an ownership interest or a qualifying condition is added.

Keep the source documents behind every important input. Depending on the subject, that may include payslips, invoices, bank statements, contracts, provider statements, travel records, HMRC notices, payroll submissions, valuations or correspondence. Where an amount is apportioned, write down the method and retain the underlying total. If a correction is made, preserve the original figure and explain the reason, date and evidence for the replacement.

Before relying on the result, check the current official guidance for the same tax year and jurisdiction. Distinguish enacted law from a consultation, draft measure, announcement or future proposal, and record the effective date. Reconcile the final estimate to the relevant return, payroll record or HMRC account. A calculator or explanatory guide can support a decision, but it cannot replace the eligibility test or the official filing and payment process.

Evidence and decision checks

A reliable uk incorporation relief claim 2026 27 review starts by fixing the tax year and the date on which the relevant event happened. Record the person's or business's status, the income or transaction category, the amount before tax, tax already withheld, and any election or claim being relied on. Do not combine a headline figure with a final liability: the result can change when another income source, a payment date, an ownership interest or a qualifying condition is added.

Keep the source documents behind every important input. Depending on the subject, that may include payslips, invoices, bank statements, contracts, provider statements, travel records, HMRC notices, payroll submissions, valuations or correspondence. Where an amount is apportioned, write down the method and retain the underlying total. If a correction is made, preserve the original figure and explain the reason, date and evidence for the replacement.

Before relying on the result, check the current official guidance for the same tax year and jurisdiction. Distinguish enacted law from a consultation, draft measure, announcement or future proposal, and record the effective date. Reconcile the final estimate to the relevant return, payroll record or HMRC account. A calculator or explanatory guide can support a decision, but it cannot replace the eligibility test or the official filing and payment process.

Evidence and decision checks

A reliable uk incorporation relief claim 2026 27 review starts by fixing the tax year and the date on which the relevant event happened. Record the person's or business's status, the income or transaction category, the amount before tax, tax already withheld, and any election or claim being relied on. Do not combine a headline figure with a final liability: the result can change when another income source, a payment date, an ownership interest or a qualifying condition is added.

Keep the source documents behind every important input. Depending on the subject, that may include payslips, invoices, bank statements, contracts, provider statements, travel records, HMRC notices, payroll submissions, valuations or correspondence. Where an amount is apportioned, write down the method and retain the underlying total. If a correction is made, preserve the original figure and explain the reason, date and evidence for the replacement.

Before relying on the result, check the current official guidance for the same tax year and jurisdiction. Distinguish enacted law from a consultation, draft measure, announcement or future proposal, and record the effective date. Reconcile the final estimate to the relevant return, payroll record or HMRC account. A calculator or explanatory guide can support a decision, but it cannot replace the eligibility test or the official filing and payment process.

For related planning context, read the UK gift hold-over relief guide and the UK tax changes guide. This page explains the post-6 April 2026 claim process; it is not a substitute for a transaction-specific Capital Gains Tax review.

Official sources

• HMRC — Capital Gains Tax: Incorporation Relief claims process
• HMRC Capital Gains Manual — claim for transfers from 6 April 2026
• GOV.UK — Incorporation Relief
• HMRC — Incorporation Relief HS276
• Finance Act 2026 — incorporation relief requirement to claim
• GOV.UK — Budget 2025 overview of tax legislation and rates