Wills, Trusts & Estates · Landlords · Company Structure
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Properties Held in a Limited Company — Inheritance Tax & Succession
Many landlords have transferred their portfolios into a limited company structure for tax efficiency during their lifetime. But holding property through a company creates a distinct set of estate planning challenges — ones that a standard will is unlikely to address.
We advise on the inheritance tax treatment of company shares, Business Property Relief eligibility, pre-emption rights in the articles of association, and how to ensure your shares pass to your chosen beneficiaries without unnecessary delay, cost, or dispute.
No obligation — talk through your options first. Costs explained clearly.
Why company-held portfolios need specialist advice
The decision to hold a property portfolio through a limited company is usually driven by income tax and stamp duty considerations. But the estate planning consequences are often overlooked — and they are significant. When you die, your estate does not include the properties themselves: it includes your shares in the company that owns them. That distinction changes everything.
IHT on company shares — the key difference
Whether you hold property directly or through a company, the value is in your estate and subject to IHT at 40% on the excess above the nil rate band. The company wrapper does not reduce the IHT charge on death — and in some respects can make it more complex to administer.
The critical difference is that your beneficiaries inherit shares in a company, not the properties themselves. To access the underlying assets, they must either continue to hold the shares, sell the company, or extract the properties — each of which has its own tax and practical consequences.
Business Property Relief — does it apply to a property company?
Business Property Relief (BPR) can reduce or eliminate IHT on qualifying business assets — but HMRC draws a sharp distinction between trading companies and investment companies.
Standard buy-to-let company
A company whose sole or main activity is holding residential investment property is treated by HMRC as an investment company, not a trading company. BPR is not available. The shares are fully within the estate for IHT purposes.
Company with a genuine trading element
If the company carries on a genuine trade alongside property investment — for example, a serviced accommodation business, a property development operation, or a furnished holiday let business — partial BPR may be available on the trading element. This requires careful analysis.
The BPR position is fact-specific and can be contested by HMRC. We advise on whether your company structure is likely to qualify, and on the steps that can be taken during your lifetime to improve the position.
Pre-emption rights — the hidden obstacle to passing shares to beneficiaries
Many private limited companies — including property investment companies — have articles of association that contain pre-emption rights. These are provisions that require a shareholder who wishes to transfer shares to first offer them to the existing shareholders at a specified price before they can be transferred to anyone else.
What pre-emption rights mean on death
When you die, your personal representatives (executors) step into your shoes as the legal holder of your shares.
If the articles contain pre-emption rights that apply on death or on a transfer by personal representatives, the executors may be required to offer the shares to the other shareholders before they can be transferred to your beneficiaries.
The price at which the shares must be offered is often set by the articles — and may not reflect the true market value of the underlying properties.
If the other shareholders exercise their pre-emption rights, your beneficiaries receive cash (at the articles price) rather than the shares — which may not be what you intended.
If the other shareholders do not exercise their rights, the shares can then be transferred to your beneficiaries — but the process adds time and complexity to the estate administration.
The articles of association and memorandum of association are the constitutional documents of the company. They must be reviewed as part of any estate planning exercise for a landlord with a company-held portfolio. We review these documents and advise on whether the pre-emption provisions create a risk for your succession plan.
Amending the articles during your lifetime
If you are the controlling shareholder and director of the company, you have the power to amend the articles of association during your lifetime. This is done by passing a special resolution — which requires 75% of the voting shares. If you hold the controlling interest, you can pass this resolution yourself.
Remove or modify pre-emption rights
You can amend the articles to remove pre-emption rights on death entirely, or to carve out transfers to family members or named beneficiaries from the pre-emption obligation. This ensures your shares can pass freely under your will without the surviving shareholders having a right of first refusal.
Introduce permitted transferee provisions
Many well-drafted articles include a "permitted transferee" category — allowing shares to be transferred to family members or trusts without triggering pre-emption rights. If your articles do not contain this, it can be added by special resolution.
Align articles with your will
Your will and the articles of association should be read together. If there is a conflict between what your will says and what the articles require, the articles will generally prevail. We ensure both documents work in harmony.
Act before it is too late
Once you have died, your personal representatives are bound by the articles as they stand. Amendments can only be made during your lifetime. This is one of the most time-sensitive aspects of estate planning for landlords with company structures.
Transferring shares vs. transferring the underlying properties
When a landlord with a company-held portfolio dies, there are two broad routes by which the portfolio can ultimately pass to the beneficiaries. The choice between them — or a combination of both — has significant tax and practical consequences.
Transfer of shares in the company
The shares in the company are transferred to the beneficiaries under the will (subject to any pre-emption rights in the articles). The beneficiaries become the new shareholders and inherit the company with all its assets and liabilities — including the properties, any mortgages, and any deferred tax within the company. No SDLT is payable on the share transfer itself. The beneficiaries take on the company's base cost for CGT purposes.
Distribution of properties out of the company
The company transfers the properties to the beneficiaries (or to the estate) before or after the shareholder's death. This is a disposal by the company for corporation tax purposes — triggering a corporation tax charge on any gain since acquisition. SDLT may also be payable on the transfer. This route is generally more expensive in tax terms but may be preferred if the beneficiaries do not want to continue holding a company.
Sale of the company as a whole
The personal representatives sell the shares in the company to a third party and distribute the proceeds. This may be appropriate where the beneficiaries do not wish to continue as landlords, or where the estate needs liquidity to pay IHT. The sale price will reflect the value of the underlying properties, less any deferred tax within the company.
Succession planning for controlling shareholders who are also directors
Many landlords who hold their portfolio through a company are both the controlling shareholder and the sole or majority director. This combination creates specific succession planning issues that go beyond the will itself.
Key issues for controlling shareholder-directors
Who runs the company after you die?
If you are the sole director, the company has no director on your death. Your personal representatives cannot act as directors unless the articles permit it. The company may be unable to manage the properties, collect rent, or deal with tenancy issues until a new director is appointed. We advise on how to address this in the articles and in your will.
Lasting Power of Attorney for the company
If you lose mental capacity, your ability to act as director ceases. An LPA for property and financial affairs covers your personal assets — but it does not automatically extend to your role as director. We advise on the interaction between an LPA and your directorship, and on the steps that can be taken to ensure the company can continue to function if you lose capacity.
Appointing a successor director
You can appoint a successor director in your will, or make provision in the articles for a named person to become a director on your death. This ensures continuity of management and avoids the company being left without a director during the estate administration period.
Cross-option agreements with co-shareholders
If there are other shareholders in the company, a cross-option agreement (sometimes called a "buy-sell agreement") can give the surviving shareholders the option to buy out your estate's shares — and give your estate the option to require the surviving shareholders to buy them. This provides certainty for all parties and avoids your beneficiaries being locked into a company with people they do not know or wish to be in business with.
What we advise on
Review of articles of association and memorandum
We review the constitutional documents of your company to identify pre-emption rights, transfer restrictions, and any provisions that could affect the succession of your shares on death.
IHT analysis for company-held portfolios
We analyse the IHT position for your estate, taking into account the value of your shares, the nil rate band, the residence nil rate band (if applicable), and any BPR that may be available.
Will drafting for shareholder-landlords
We draft a will that addresses your shareholding specifically — including provisions for the appointment of a successor director, instructions for your executors on dealing with the shares, and any specific gifts of shares or the underlying properties.
Amendment of articles during your lifetime
Where the articles contain provisions that would obstruct your succession plan, we advise on and assist with amending them by special resolution — removing or modifying pre-emption rights, introducing permitted transferee provisions, and aligning the articles with your will.
Cross-option agreements
Where there are co-shareholders, we advise on cross-option agreements to provide certainty for all parties on the death of a shareholder — including the valuation mechanism and the interaction with the articles.
Lasting Power of Attorney
We advise on LPAs for property and financial affairs, taking into account your role as director and the steps needed to ensure the company can continue to function if you lose capacity.
The team advising landlords with company structures
Darren Steele
Senior Private Client Executive · STEP Member
Company Structure & IHTDarren has worked in the legal sector since 1998 and has been a STEP member since 2011. He advises landlords who hold portfolios through limited companies on the IHT implications of company shares, succession planning, and how to structure a will that properly addresses both the shares and the underlying property assets.
Laura Kirton
Wills & Probate Solicitor · 10 Years Qualified
Shareholder Wills & SuccessionLaura regularly advises landlords and business owners on wills that address company shareholdings — including the interaction between a will and the articles of association, pre-emption rights, and the options available to a controlling shareholder who also acts as director.
David Stahler
Wills, Trusts & Estates Executive
Estate PlanningDavid is our first point of contact for landlords enquiring about estate planning for company-held portfolios. He brings a warm, personable approach to what can be a complex subject — and clients consistently remark on how clearly he explains the issues.
Nikolina Vukovic
Legal Executive — Wills, Trusts & Estates
Wills & Estate AdministrationNikolina supports clients through estate administration involving company shareholdings — including obtaining probate where the estate includes shares in a private property company, and liaising with Companies House and co-shareholders during the administration process.
Common questions
Does holding property in a limited company reduce inheritance tax?
Not automatically. The shares in a property investment company form part of your estate and are subject to IHT at 40% on the value above the nil rate band. Business Property Relief may apply to shares in a qualifying trading company, but HMRC takes the view that a company whose main activity is holding investment property is not a trading company — so BPR is unlikely to be available for a standard buy-to-let company.
What are pre-emption rights and how do they affect passing shares to beneficiaries?
Pre-emption rights are provisions in the articles of association that require a shareholder to offer their shares to the existing shareholders before transferring them to a third party. On death, if the articles contain pre-emption rights, the personal representatives may be required to offer the shares to the surviving shareholders before they can be transferred to the beneficiaries named in the will.
Can I amend the articles of association to remove pre-emption rights?
Yes. If you are the controlling shareholder and director, you can pass a special resolution to amend the articles during your lifetime — removing or modifying pre-emption rights so that your shares can pass freely to your chosen beneficiaries on your death. This must be done before death; once you have died, your personal representatives are bound by the articles as they stand.
Is it better to transfer shares or transfer the underlying properties to beneficiaries?
This depends on the IHT position, capital gains tax implications, stamp duty land tax, and the wishes of the beneficiaries. Transferring shares passes the company (and all its assets and liabilities) to the beneficiaries. Transferring the underlying properties out of the company involves two separate transactions, each with potential tax consequences. We advise on the most tax-efficient route in each case.
What happens to the company if I am the sole director and I die?
If you are the sole director, the company has no director on your death. Your personal representatives cannot act as directors unless the articles permit it. The company may be unable to manage the properties or deal with tenancy issues until a new director is appointed. We advise on how to address this in the articles and in your will — including appointing a successor director.
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If your property portfolio is held through a limited company, the articles of association and your will must work together. Speak to a specialist today.
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