The Section 24 rules changed the game for mortgaged landlords. We apply the 20 per cent tax credit correctly, show you the real impact on your numbers, and model whether incorporating could help.
Section 24 Mortgage Interest
Section 24 phased out the ability to deduct mortgage interest from rental income. Instead of reducing your taxable rent, mortgage interest now only gives a tax credit worth 20 per cent of the interest. For higher and additional-rate landlords this significantly increased tax bills, and in some cases pushed people into higher tax bands because the full rent is now taxed before the credit.
Your Tax Help Accountants applies the credit correctly, shows you exactly how Section 24 affects your position, and models the alternatives, including holding property through a limited company, where mortgage interest remains fully deductible, versus the costs of transferring. We help you make an informed decision rather than a guess.
Because Section 24 taxes your full rent before giving a 20 per cent credit, it can tip landlords into higher-rate tax or the £100k allowance taper even though their real profit has not changed. Understanding that effect is the first step to managing it.
The Detail That Matters
Section 24 removed landlords' ability to deduct mortgage interest from rental profit, replacing it with a flat 20% tax credit. Fully in force since April 2020, it hits higher-rate landlords hardest and can even create tax bills where there is little or no real profit.
Before 2017, interest was a normal deductible expense. Now it is added back to your taxable profit and you receive a 20% credit against the tax instead. A basic-rate taxpayer is broadly unaffected, but a higher-rate taxpayer effectively gets relief at 20% on a cost that reduced their real income at 40%.
Because the interest is no longer deducted, your taxable rental profit is higher, which can tip your total income into the higher-rate band, restrict your personal allowance over £100,000, or trigger the Child Benefit charge, knock-on effects that catch many landlords by surprise.
Holding property through a limited company restores full interest relief (companies are outside Section 24), which is why many landlords incorporate, though the transfer has Capital Gains Tax and Stamp Duty costs to weigh. Transferring a share to a lower-rate spouse, or repaying debt, can also reduce the impact.
Incorporation is not automatically right: it suits larger or growing portfolios and new purchases more than a casual switch. We model your position both ways, personal versus company, including the one-off costs, so any change is based on real numbers rather than a rule of thumb.
The cruellest feature of Section 24 is being taxed on a profit that includes money you never keep, the interest goes straight to the lender, yet you pay tax as if it were income, so heavily geared higher-rate landlords can pay tax on a loss.
Key Figures
How We Help
Mortgage interest now gives a 20 per cent tax credit rather than a deduction. We apply it correctly so you get the full relief you are entitled to.
We show you exactly how Section 24 changes your tax, including any knock-on effect on your tax band, child benefit or personal allowance.
In a company, mortgage interest stays fully deductible. We model incorporation against the transfer costs and CGT and SDLT implications, so you decide with the facts.
All the forms, calculations and correspondence handled on your behalf, so you never have to decode HMRC's rules or sit on hold.
A clear fixed fee quoted after a free call, your position explained in plain English, and never a surprise bill.
We act quickly, and where earlier years are involved we put those right too, reclaiming refunds or minimising penalties.
Section 24 quietly increased tax for many landlords and even pushed some into higher bands or benefit charges. Applying the credit correctly and understanding the knock-on effects is essential, and for larger portfolios, incorporation may help, but only after proper modelling, which we provide.
Recent Client Outcome
A landlord with four mortgaged properties had seen their tax bill climb sharply and was being pushed into the higher-rate band despite modest real profits.
What we did. We modelled their position personally against a limited-company structure, factoring in the Capital Gains Tax and Stamp Duty of incorporating the existing portfolio versus buying future properties through a company.
The outcome. Incorporating the existing four properties was not worthwhile once the transfer costs were counted, but buying all future properties through a new company was, restoring full interest relief on the growing part of the portfolio and capping the Section 24 damage.
The decision was made on hard numbers, avoiding a costly incorporation that would not have paid, while still fixing the problem for future growth.
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