For decades, being a landlord was tax-simple: you collected rent, subtracted your costs — including all of your mortgage interest — and paid tax on what was left. Then came Section 24, phased in between 2017 and 2020, and the arithmetic changed for everyone who owns property in their own name with a mortgage.
The rule sounds technical but the effect is brutal in its simplicity: individual landlords can no longer deduct mortgage interest from their rental profit. Instead, you're taxed on the rent before interest, and then handed a flat 20% "tax credit" on the interest you paid. For a basic-rate taxpayer that's roughly a wash. For a higher-rate taxpayer, it's a different universe.
How Section 24 actually bites
Take a simple flat. It earns £12,000 a year in rent, costs £2,000 in running costs and £7,500 in mortgage interest. In real cash, the landlord clears £2,500. Here's how that same flat is taxed three different ways:
| Basic-rate (personal) | Higher-rate (personal) | Company | |
|---|---|---|---|
| Profit taxed (rent − costs) | £10,000 | £10,000 | £2,500 |
| Tax before credit | £2,000 | £4,000 | £475 |
| 20% interest credit | −£1,500 | −£1,500 | n/a |
| Tax due | £500 | £2,500 | £475 |
| Effective rate on your £2,500 cash | 20% | 100% | 19% |
Read that higher-rate column again. The landlord made £2,500 in cash and owes £2,500 in tax — an effective rate of 100%. Push the borrowing higher or rates up a little, and the tax can exceed the cash profit entirely: you can be loss-making after tax on a property that is "profitable" on paper.
Section 24 doesn't tax your profit. It taxes your turnover, then gives a little back — and for higher-rate landlords that's the whole problem.
A company, by contrast, is untouched by Section 24. It deducts every penny of interest as a normal business expense and pays Corporation Tax on what's genuinely left — 19% on profits up to £50,000. On this flat, the company keeps almost five times as much after tax as the higher-rate individual.
Why it gets worse as you scale
Here's the part that catches people out. Because your rental profit is added on top of your other income, every property you buy personally nudges you further up the tax bands — and can drag you into the 40% band, or the brutal 60% zone where the personal allowance tapers away above £100,000. The company's profits, meanwhile, are ring-fenced and taxed on their own.
Model a landlord on a £45,000 salary buying identical leveraged flats, and the two ownership routes don't just differ — they pull apart violently:
By a handful of properties the personal landlord's after-tax cashflow has flatlined; a few more and it's negative — they're subsidising the portfolio from their salary — while the company owner banks tens of thousands. This single dynamic is why incorporation has gone from niche to mainstream among serious landlords.
So why doesn't everyone use a company?
Because companies come with their own frictions, and they aren't free. The headline tax saving is real, but it has to clear several hurdles:
| Personal name | Limited company | |
|---|---|---|
| Mortgage interest | Not deductible (20% credit only) | Fully deductible |
| Tax on profit | Your marginal rate (20–45%) | 19–25% Corporation Tax |
| Getting money out | It's already yours | Dividend/salary tax on the way out |
| Mortgage rates | Cheaper, more choice | Higher rates, fewer lenders |
| Admin | A self-assessment return | Accounts, filings, accountant fees |
| Moving existing property in | — | Triggers SDLT & CGT |
The biggest catch is the last mile. Profit in a company isn't yours until you extract it, and taking it as dividends is taxed again (8.75% / 33.75% / 39.35%). If you need the rental income to live on now, that second layer of tax narrows the gap. If you're reinvesting to grow a portfolio, the company's lower rate compounds powerfully and the extraction question can wait for years.
See it on your own numbers
Our buy-to-let analyser models Section 24 in full, switches between personal and company ownership, runs the lender stress test and plots exactly the portfolio curve you see above.
Open the Buy-to-Let calculator →Rules of thumb
- Basic-rate taxpayer, one or two properties, low borrowing? Personal ownership is usually simplest and the tax difference is small.
- Higher-rate taxpayer with mortgages, planning to grow? A company increasingly wins, often by a wide margin, especially if you'll reinvest the profits.
- Already own property personally? Don't rush to transfer it in — that can crystallise Stamp Duty and Capital Gains Tax today. Model it before you move.
The bottom line
Section 24 quietly turned buy-to-let from a simple income play into a tax-planning exercise. For lightly-geared basic-rate landlords, little has changed. For higher-rate, mortgaged, growth-minded investors, the structure you choose can be the difference between a portfolio that compounds and one that quietly loses money after tax. Run your own figures, and take proper advice before you buy or restructure — the right answer is specific to you.