Section 24 and What It Really Costs You

The maths of mortgage interest relief and your effective rate

Section 24, introduced in the Finance (No. 2) Act 2015 and fully phased in by the 2020 to 2021 tax year, means that landlords who own property in their own name can no longer deduct mortgage interest before tax, and instead receive a tax reduction worth twenty per cent of it. For higher-rate and additional-rate taxpayers this is a permanent increase in tax, and for heavily mortgaged landlords it can turn a real profit into a loss. This book shows you the maths. It explains the numbers that matter beyond rent and mortgage, where to find the data for free, and the wedge Section 24 drives between the cash a property produces and the profit you are taxed on. You will see the knock-on costs landlords miss, and why a rate rise is the stress test that decides everything. A complete worked example calculates the effect step by step, and the final chapter helps you build an after-tax calculator and names the legal questions it cannot answer. Next in this series: “Companies, SPVs and Incorporation”.

What’s inside

• The only numbers that actually matter
• Where to find reliable data for free
• Working out true income, not optimistic income
• The full cost stack nobody mentions
• Stress-testing for the rate rise that decides everything
• A complete worked example, start to finish
• Your deal calculator, and the legal questions it cannot answer

Educational material only, not financial, legal or tax advice. Results are not typical and are not a guarantee of income. Freedom Property Academy LTD, registered in England and Wales.