Introduction
The world of buy-to-let property has changed dramatically in recent years. Once seen as a straightforward way to build passive income, many landlords have found themselves paying significantly more tax than expected — all thanks to Section 24 of the Finance (No.2) Act 2015.
If you’re a landlord with a mortgage on your rental properties, chances are you’ve already felt the impact. But there is a solution: moving your property portfolio into a limited company structure.
In this blog, we’ll explain:
- What Section 24 actually is (without the jargon).
- How it affects landlords’ tax bills.
- Why incorporating can help restore tax efficiency.
- Practical steps to take — and why expert guidance is essential.
What is Section 24?
Before 2017, landlords could deduct all mortgage interest costs from rental income when calculating their taxable profit. This meant your tax bill fairly reflected your real profit after expenses.
Section 24 changed all that.
- Instead of deducting mortgage interest in full, landlords now receive only a 20% tax credit.
- Higher and additional-rate taxpayers can no longer offset borrowing costs against their income.
- This effectively taxes landlords on income they haven’t actually earned, because mortgage interest is still a very real cost.
For example:
- A landlord earning £30,000 in rent with £20,000 in mortgage interest used to be taxed on £10,000 profit.
- Under Section 24, the same landlord is taxed on the full £30,000, with only a small tax credit applied.
- Result: significantly higher tax bills, especially for those in the 40% and 45% brackets.
The Real Impact on Landlords
The knock-on effects of Section 24 include:
- Shrinking profits – many landlords find their net returns cut dramatically.
- Cash flow pressure – higher tax bills mean less money left to reinvest or cover maintenance costs.
- Landlords exiting the market – some small landlords are selling up entirely.
- Portfolio restructuring – savvy landlords are moving to company ownership to regain tax efficiency.
Why a Limited Company Can Be the Answer
Incorporating your property portfolio into a limited company can help undo much of the damage caused by Section 24:
- Mortgage interest is fully deductible as a business expense.
- Corporation tax rates (currently lower than higher-rate income tax) apply to profits.
- Flexible remuneration – profits can be extracted as dividends, salaries, or reinvested.
- Future planning – companies allow easier succession planning and asset protection.
Example:
- Rental income: £50,000
- Mortgage interest: £30,000
- Profit in company: £20,000 taxed at 25% = £5,000 tax
- Profit personally: £20,000 but taxed on £50,000 gross rent = potentially £10,000+ tax
Is Incorporation Right for Everyone?
Not always. Things to consider:
- Number of properties – incorporation usually benefits landlords with multiple properties or higher leverage.
- Transfer costs – SDLT and CGT may apply, but reliefs exist.
- Administration – companies come with reporting requirements.
- Lender relationships – mortgages may need refinancing.
This is why personalised advice is essential.
How Accounting Matters Helps Landlords
At Accounting Matters, we guide landlords through every stage of incorporation:
- Portfolio review – we analyse whether incorporation will save you money.
- Tax planning – we identify reliefs (such as incorporation relief or partnership exemptions) to reduce SDLT/CGT exposure.
- Company setup – we handle Companies House and HMRC registrations.
- Ongoing support – from bookkeeping to corporation tax returns, payroll, and inheritance planning.
We also provide:
- Cloud accounting with Xero, giving you clarity and control.
- Regular reviews to adapt your structure as tax rules evolve.
- Access to our Network & Nosh partner network, including mortgage brokers and legal advisors.
Conclusion & Call to Action
Section 24 has changed the game for landlords — but it doesn’t have to mean the end of profitability. By moving your portfolio into a limited company, you could restore tax efficiency, protect your assets, and plan for the future with confidence.
Ready to explore incorporation? Speak to Accounting Matters today for a personalised review of your property portfolio.