Glossary
Section 24
The rule that limits mortgage interest tax relief for individual landlords to 20%.
What it means
Section 24 of the Finance (No. 2) Act 2015 stopped individual landlords deducting mortgage interest from rental income. Instead you get a tax credit worth 20% of the interest. Basic-rate taxpayers are mostly unaffected; higher and additional-rate taxpayers pay noticeably more. It doesn't apply to limited companies, which is one reason many investors buy through one.
Worked example
ExampleA higher-rate taxpayer with £12,000 rent, £6,000 mortgage interest and £1,000 other costs.
- Tax on £11,000 at 40%
- £4,400
- Less 20% credit on interest
- £4,400 − £1,200 = £3,200
- Before Section 24
- £5,000 × 40% = £2,000
£1,200 a year more tax on the same property. Take tax advice on how to hold it.
Information, not advice. Example figures are fictional and for illustration only.