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Landlord Tax Section 24: Can Landlords Still Save Tax Despite Section 24?

If you own buy-to-let property, Landlord Tax Section 24 is probably one of the biggest tax changes you have faced in recent years. Many landlords have seen their tax bills rise significantly, even when their actual profits have remained the same.

Landlord Tax Section 24 has increased tax bills for many landlords, but it doesn’t mean tax-saving opportunities have disappeared. With the right planning and a good understanding of the rules, you can still reduce your tax liability and maximise your rental profits legally.

The good news is that although Landlord Tax Section 24 restricts mortgage interest relief, it does not mean landlords have no options left. With careful planning, there are still several completely legitimate ways to reduce your tax liability while remaining fully compliant with HMRC rules.

In this guide, we’ll explain exactly how Landlord Tax Section 24 works, who it affects, and the practical tax-saving strategies that landlords can still use today.

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What Is Landlord Tax Section 24?

Landlord Tax Section 24 refers to the finance cost restrictions introduced by the UK Government. Before these rules came into force, individual landlords could deduct all mortgage interest from their rental income before calculating tax.

Today, this is no longer possible for most individual landlords.

Instead:

• Mortgage interest is no longer treated as a deductible business expense.
• Rental profits are calculated before deducting finance costs.
• Landlords then receive a basic rate tax credit equal to 20% of their qualifying finance costs.

For many higher-rate and additional-rate taxpayers, this results in paying significantly more tax than under the previous rules.

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Why Was Section 24 Introduced?

The government introduced Landlord Tax Section 24 with the intention of creating a more level playing field between homeowners and property investors.

The objectives included:

• Reducing tax advantages for leveraged landlords.
• Slowing rapid expansion of buy-to-let investment.
• Increasing tax revenues.
• Encouraging owner-occupiers into the housing market.

Regardless of the policy reasons, many landlords have experienced substantial increases in taxable income.

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Who Does Landlord Tax Section 24 Affect?

Landlord Tax Section 24 generally affects:

• Individual landlords
• Joint property owners

It usually applies to:

• Buy-to-let properties

It generally does not apply to:

• Companies owning residential property
• Commercial property
• Certain specialist property businesses

Understanding whether your property falls within these rules is the first step towards effective tax planning.

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How Does Section 24 Increase Tax?

Let’s look at a simplified example.

Before Section 24

Rental income: £20,000

Mortgage interest: £10,000

Taxable profit:

£20,000 − £10,000 = £10,000

If taxed at 40%:

Tax = £4,000

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After Section 24

Rental income: £20,000

Mortgage interest cannot be deducted.

Taxable profit = £20,000

Tax at 40% = £8,000

Finance cost tax credit:

20% × £10,000 = £2,000

Final tax:

£8,000 − £2,000 = £6,000

Despite making exactly the same economic profit, the landlord now pays £2,000 more tax.

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How Can Landlords Still Save Tax?

Thankfully, Landlord Tax Section 24 doesn’t remove every tax planning opportunity. There are still several legal methods available.

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1. Claim Every Allowable Expense

While mortgage interest relief is restricted, many other expenses remain fully deductible.

These include:

• Letting agent fees
• Repairs and maintenance
• Insurance
• Safety certificates
• Accountancy fees
• Advertising costs
• Replacement domestic items
• Gardening and cleaning
• Service charges
• Ground rent
• Mileage for property visits
• Office costs relating to rental management

Many landlords unintentionally miss allowable expenses every year.

Keeping accurate records can significantly reduce taxable profits.

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2. Use Your Spouse’s Tax Allowances

If one spouse pays tax at 40% while the other is a basic-rate taxpayer, changing beneficial ownership may reduce the overall household tax bill.

This can involve:

• Transferring a share of the property.
• Declaring actual ownership percentages.
• Using the appropriate HMRC procedures where applicable.

Professional advice is essential before making any ownership changes, particularly where mortgages or Capital Gains Tax may be involved.

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3. Consider Incorporation Carefully

One of the biggest planning discussions surrounding Landlord Tax Section 24 is whether properties should be owned through a limited company.

Companies are generally still able to deduct mortgage interest as a business expense.

Potential benefits include:

• Full finance cost deduction.
• Corporation Tax rates may be lower than higher personal tax rates.
• Greater flexibility over extracting profits.
• Easier long-term reinvestment.

However, incorporation is not suitable for everyone.

Potential drawbacks include:

• Stamp Duty Land Tax.
• Capital Gains Tax.
• Mortgage refinancing costs.
• Higher accountancy costs.
• Dividend taxation when profits are withdrawn.

Every landlord’s circumstances are different, so incorporation should always be considered as part of a full tax review rather than a one-size-fits-all solution.

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4. Reduce Borrowing Where Practical

Because mortgage interest relief is restricted, highly leveraged properties often become less tax efficient.

Where financially sensible, landlords may choose to:

• Reduce mortgage balances.
• Use savings to repay debt.
• Focus on improving cash flow rather than maximising leverage.

This can improve both profitability and tax efficiency over time.

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5. Review Your Portfolio

Sometimes the biggest savings come from reviewing the entire portfolio.

Ask yourself:

• Are all properties profitable?
• Are some producing very little after tax?
• Are there underperforming investments?
• Could refinancing improve returns?

A periodic review often identifies opportunities that have nothing to do with tax legislation itself.

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6. Time Repairs Wisely

Major repairs remain allowable revenue expenses where they restore rather than improve the property.

Planning large repair work during years with higher rental profits may help reduce taxable income more effectively.

Always distinguish between repairs and capital improvements, as the tax treatment differs.

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7. Maximise Pension Contributions

Although this doesn’t reduce rental profits directly, pension contributions can reduce your overall income tax liability.

Lower taxable income may:

• Reduce exposure to higher-rate tax.
• Improve entitlement to allowances.
• Reduce the effective impact of Landlord Tax Section 24.

This strategy is particularly valuable for landlords with employment income alongside rental income.

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8. Keep Excellent Records

Poor record keeping costs landlords thousands of pounds every year.

Maintain records of:

• Mortgage statements
• Invoices
• Repair receipts
• Insurance documents
• Mileage logs
• Agent statements
• Bank statements

Good bookkeeping ensures every allowable deduction is claimed and makes tax returns far easier to prepare.

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Common Mistakes Landlords Make

Many landlords unintentionally increase their tax bill by:

• Assuming mortgage interest is fully deductible.
• Missing allowable expenses.
• Ignoring ownership planning.
• Failing to seek advice before buying another property.
• Waiting until January to review tax.
• Mixing personal and rental finances.
• Not planning for future tax liabilities.

Avoiding these mistakes can often save far more than many people expect.

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Should You Move Your Properties Into a Limited Company?

This is one of the most common questions accountants receive regarding Landlord Tax Section 24.

The answer depends on several factors, including:

• Number of properties.
• Mortgage balances.
• Future investment plans.
• Current income.
• Capital gains position.
• Age.
• Succession planning.
• Long-term objectives.

For some landlords, incorporation generates substantial long-term savings.

For others, the tax costs of transferring existing properties outweigh the benefits.

Professional calculations should always be completed before making a decision.

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Is Section 24 Here to Stay?

At present, Landlord Tax Section 24 remains part of UK tax legislation.

While tax rules can change in future Budgets, landlords should plan based on current legislation rather than waiting for possible policy changes.

Taking action now usually produces better long-term financial outcomes than delaying important tax planning decisions.

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Final Thoughts

Although Landlord Tax Section 24 has undoubtedly increased tax bills for many property investors, it has not removed every opportunity for tax efficiency. Careful planning, accurate bookkeeping, claiming every allowable expense, reviewing ownership structures, and considering incorporation where appropriate can all help reduce your overall tax liability.

The key is not to assume that Landlord Tax Section 24 means higher tax is unavoidable. Every landlord’s circumstances are different, and the right strategy depends on your income, mortgage levels, future investment plans, and long-term goals. By reviewing your position regularly and seeking professional advice before making major decisions, you can remain compliant with HMRC while ensuring your property portfolio is as tax efficient as possible.

Landlord Tax Section 24 has undoubtedly changed how many landlords are taxed, but it doesn’t mean tax-saving opportunities have disappeared. By understanding the rules and planning ahead, you can still reduce your tax liability while remaining fully compliant with HMRC.

The key to managing Landlord Tax Section 24 is to review your property portfolio regularly, claim every allowable expense, and consider whether your current ownership structure remains the most tax-efficient. Small changes can often make a significant difference over time.

Every landlord’s circumstances are different, so there is no one-size-fits-all solution. If you’re unsure how Landlord Tax Section 24 affects you, seeking professional tax advice can help you protect your rental profits and make informed decisions for the future.

Although Landlord Tax Section 24 has made property taxation more challenging, proactive planning can still make a significant difference. Reviewing your tax position each year and taking advice before making major property decisions can help you minimise tax, improve cash flow, and maximise the long-term return from your rental investments.

Need help deciding what’s best for your situation?
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