TOOLS

Section 24 Tax Calculator

Compare holding a buy-to-let personally against holding it through a limited company. See exactly how Section 24's mortgage interest restriction affects your tax bill next to standard corporation tax.

Annual Rental Incomegross rent for the year
£2k£200k
Annual Mortgage Interestinterest paid, not full mortgage payment
£0k£100k
Other Allowable Expensesletting agent, maintenance, insurance — deductible either way
£0k£50k

Your Income Tax Band (Personal Ownership)

Tax Difference

£3,180

Holding via a limited company costs less tax at this profit level.

Held Personally

Real Cash Profit (rent − expenses − interest)£8,000
20% Tax Credit on Interest£1,500
Income Tax Due£4,700
After-Tax Profit£3,300

Held via Limited Company

Corporation Tax Rate Applied19.0%
Corporation Tax Due£1,520
After-Tax Profit£6,480

Illustrative only. Doesn't include dividend or salary extraction tax on the Ltd company side, personal allowance tapering, or other income stacking with your rental profit. Incorporating an existing portfolio can trigger stamp duty and capital gains tax on the transfer, plus new mortgage arrangement costs — always take professional tax advice before restructuring. Not financial or tax advice.

What This Calculator Does

This tool compares the real tax cost of holding a buy-to-let property personally versus through a limited company, given the same rental income, mortgage interest, and other expenses — the two structures are taxed completely differently since 2020's Section 24 changes.

Personal ownership no longer lets you deduct mortgage interest from rental income before tax — instead you get a flat 20% tax credit on the interest paid. A limited company still deducts interest as a normal business expense and pays corporation tax on what's left. Pick your income tax band to see the personal-ownership numbers, and the calculator works out the equivalent corporation tax automatically based on the profit level.

How the Calculation Works

Personal: income tax is charged on (rental income − other expenses) at your marginal rate — mortgage interest is added back, not deducted. You then get a 20% tax credit on the interest actually paid, which is subtracted from the tax bill, not from the taxable profit itself.

Limited company: corporation tax is charged on (rental income − other expenses − mortgage interest), since interest is a fully deductible business expense. The rate is 19% up to £50,000 profit, 25% above £250,000, and a tapered marginal relief rate in between.

Real cash profit (rent minus all costs including interest) is identical either way — only the tax treatment differs. That's why the comparison shows the same cash profit figure once, then two different tax bills and two different after-tax results underneath it.

Worked Example

A higher-rate (40%) taxpayer with £18,000 annual rent, £7,500 mortgage interest, and £2,500 in other allowable expenses.

  • Rental income: £18,000
  • Other expenses: £2,500 → profit before interest: £15,500
  • Personal: income tax = £15,500 × 40% = £6,200, minus 20% credit on £7,500 interest (£1,500) = £4,700 due
  • Real cash profit: £18,000 − £2,500 − £7,500 = £8,000
  • Ltd: taxable profit = £8,000 (interest deducted) × 19% = £1,520 due

Same £8,000 real cash profit either way, but £4,700 in personal tax versus £1,520 in corporation tax — £3,180 more kept by holding through a limited company at this profit level and tax band.

Frequently Asked Questions

What exactly is Section 24?

Section 24 of the Finance (No. 2) Act 2015, fully in effect since the 2020/21 tax year, removed individual landlords' ability to deduct mortgage interest as an expense before calculating taxable rental profit. Instead, they receive a flat 20% tax credit on the interest paid, regardless of their actual income tax rate.

Does Section 24 affect limited companies too?

No — Section 24 only applies to individual landlords (including those in partnerships). Limited companies were never affected; they've always deducted loan interest as a normal business expense before paying corporation tax on the remainder, which is exactly why incorporation became a common strategy after 2020.

Is incorporating my portfolio always the right move?

Not automatically. Moving an existing personally-held property into a company usually counts as a sale for tax purposes — triggering capital gains tax and stamp duty land tax (usually with no first-time-buyer or multiple-dwellings relief available) on the transfer, plus the cost of a fresh mortgage in the company's name. It tends to make more sense for new purchases or highly-geared portfolios generating large amounts of interest, not automatically for everyone. Get professional tax advice before restructuring.

Why would a basic-rate taxpayer be less affected by Section 24?

Because the 20% tax credit exactly matches a basic-rate taxpayer's marginal rate, the net effect of Section 24 is roughly neutral for them — they're taxed on the higher (interest-excluded) profit figure but get the corresponding credit back. Higher and additional-rate taxpayers get only a 20% credit against interest that would otherwise have offset tax at 40% or 45%, which is where the real cost bites.

Does the 20% tax credit apply to the whole mortgage payment?

No — only the interest portion. If you're on a repayment mortgage, the capital repayment part of your monthly payment was never tax-deductible for landlords in the first place, so Section 24 doesn't change how that portion is treated; it only changed the treatment of the interest element.