There is a lot of confusion among landlords about Section 24, also known as the ‘Tenant Tax’.
The government introduced Section 24 of the Finance Act 2015 in April 2017. In simple terms, Section 24 removes a landlord’s right to deduct mortgage interest and other finance costs (such as mortgage arrangement fees) from their rental income before calculating their tax liability. For the 2020/2021 tax year and beyond, landlords will only be able to claim a tax credit of 20% based on their loan and mortgage interest.
The introduction of Section 24 is a huge change because it will put some landlords into a higher tax bracket. Landlords with significant mortgage commitments could even end up paying more tax on minimal profits, pushing them into the red.
Limited companies are exempt from Section 24, so one way to beat the system is to move your portfolio into a limited company. However, this has repercussions in other areas, in particular, Stamp Duty Land Tax and Capital Gains tax. You may also be hit with early repayment charges from your mortgage lender.
Jiten Shah is an expert in dealing with incorporation and during the webinar on Thursday 5th August 2021 Jiten answered questions about some of the issues surrounding incorporation.
Prab Paul, a landlord with over 15 years of experience, spoke about the main consequences of section 24 for landlords, and why he chose incorporation as a way to offset it for his own property portfolio. He also shared how you can take advantage of a tax-free drawdown facility on the back of your Incorporation.
– What is Section 24?
– Why did the Government Introduce Section 24?
– Who is Affected by Section 24?
– Which Costs can no Longer be Claimed Under Section 24?
– How Does Section 24 Work?
– Is the Introduction of Section 24 Already Having an Effect?
– How to offset Section 24?
– Would you like to be able to claim 100% of your mortgage interests?
– Would you like to take advantage of a tax-free drawdown facility?
– How does JMS Accounting solve this problem?
After watching this webinar you may find it helpful to have a free deep dive consultation. You can learn more about our free Incorporation “deep dive” consultation here.