The Silent Profit Killer: Understanding Section 24

For decades, being a landlord was a simple equation. You collected rent, paid the mortgage, and paid tax on the difference.

Then came Section 24 of the Finance Act 2015. It fundamentally changed the rules of the game for individual landlords, yet many still don't fully appreciate the impact until they file their tax return.

The Change

Before 2017, finance costs (like mortgage interest) were a tax-deductible expense. If you earned £15,000 rent and paid £10,000 interest, you made £5,000 profit and were taxed on that £5,000.

Under Section 24, mortgage interest is no longer a deductible expense.

Instead, you are taxed on the full rental income, and then given a 20% tax credit for your interest costs. For basic rate taxpayers, this often results in the same tax bill. But for higher rate taxpayers, it is a disaster.