"However, the new Section 24 rules meant that this was no longer possible, and instead a flat 20% tax credit is applied. This massively affected taxable income and hit high-earning landlords the most (those paying 40-45% in personal income tax). As a result of this, many landlords chose the alternative method of operating under a limited company, as Section 24 does not apply to these and mortgage interest can be deducted as a business expense."
"It is important to bear in mind though that when you hold tax in a limited company, you are subject to corporation tax and dividend tax, and there may be more administrative costs in running a limited company. If you are switching to operating under a limited company as a landlord, bear in mind that you are selling the property from your personal name to the company, which is a separate legal structure. As such, you are subject to stamp duty rules."
Between 2017 and 2020 Section 24 changed mortgage interest relief for landlords, replacing full interest deductions with a flat 20% tax credit. The change increased taxable income for higher-rate taxpayers and prompted many landlords to adopt limited company structures. Limited companies can deduct mortgage interest as a business expense and avoid Section 24, potentially lowering tax bills. Limited company ownership introduces corporation tax, dividend tax, and higher administrative costs. Transferring property to a company involves selling the asset into a separate legal entity and triggers stamp duty. Obtaining competitive limited company mortgage deals and specialist broker support can materially affect overall costs.
Read at Business Matters
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