Section 24: Own Your Buy-to-Let Personally or Through a Company?
For decades, letting a property was refreshingly simple at tax time: you added up the rent, took off your costs — including every pound of mortgage interest — and paid tax on whatever was left. Section 24, phased in between 2017 and 2020, quietly rewrote that sum for anyone holding a mortgaged property in their own name.
The mechanics sound dry, but the effect is not. Individual landlords can no longer deduct mortgage interest from their rental profit at all. Instead you are taxed on the rent before interest, and then handed a flat 20% tax credit on the interest you paid. For a basic-rate taxpayer the two roughly cancel out. For a higher-rate taxpayer, they do not — and the gap can be enormous.
How Section 24 actually bites
Picture a single flat. It brings in £12,000 of rent a year, runs up £2,000 of costs and £7,500 of mortgage interest. In hard cash the landlord is left with £2,500. Here is how that identical flat is taxed three different ways:
| Basic-rate (personal) | Higher-rate (personal) | Company | |
|---|---|---|---|
| Profit taxed (rent − costs) | £10,000 | £10,000 | £2,500 |
| Tax before credit | £2,000 | £4,000 | £475 |
| 20% interest credit | −£1,500 | −£1,500 | n/a |
| Tax due | £500 | £2,500 | £475 |
| Effective rate on your £2,500 cash | 20% | 100% | 19% |
Look again at the higher-rate column. The landlord banked £2,500 in cash and owes £2,500 in tax — an effective rate of 100%. Nudge the borrowing up or let interest rates climb a little and the tax bill can overtake the cash profit altogether: on paper the flat is "profitable", yet after tax it loses money.
Section 24 does not tax your profit. It taxes your turnover and then hands a little back — and for higher-rate landlords, that is the whole problem.
A limited company sits entirely outside Section 24. It treats mortgage interest as an ordinary business expense and deducts every penny, then pays Corporation Tax only on what is genuinely left — 19% on the first £50,000 of profit, rising through marginal relief to 25% once profits reach £250,000. On this flat, the company keeps almost five times as much after tax as the higher-rate individual.
Why it gets worse as you scale
Here is the part that ambushes people. Held personally, your rental profit stacks on top of your salary and everything else you earn, so each new flat nudges you further up the tax bands. The higher-rate threshold is £50,270; between £100,000 and £125,140 your £12,570 personal allowance tapers away, creating an effective 60% band before it disappears entirely. A company's profits, by contrast, are ring-fenced and taxed on their own, whatever you earn elsewhere.
Model a landlord on a £45,000 salary buying a run of identical, leveraged flats and the two routes do not merely diverge — they tear apart:
Cumulative after-tax cashflow as identical, leveraged flats are added, for a landlord on a £45,000 salary. The personal line flattens and then dips below zero as the stacked profit crosses into higher tax bands; the company line keeps climbing. Illustrative.
Within a handful of properties the personal landlord's after-tax cashflow has flattened; a few more and it turns negative — they are topping up the portfolio out of their salary — while the company owner is banking tens of thousands. That single dynamic is why incorporation has moved from niche tactic to mainstream default among landlords who are serious about scaling.
So why doesn't everyone use a company?
Because a company brings frictions of its own, and none of them are free. The headline tax saving is real, but it has to clear several hurdles first:
| Personal name | Limited company | |
|---|---|---|
| Mortgage interest | Not deductible (20% credit only) | Fully deductible |
| Tax on profit | Your marginal rate (20–45%) | 19–25% Corporation Tax |
| Getting money out | It is already yours | Dividend/salary tax on the way out |
| Mortgage rates | Cheaper, more choice | Higher rates, fewer lenders |
| Admin | A self-assessment return | Accounts, filings, accountant fees |
| Moving existing property in | — | Triggers SDLT & CGT |
The sharpest catch is the last mile. Profit sitting in a company is not yours until you take it out, and extracting it as dividends is taxed a second time — 10.75% in the basic-rate band and 35.75% for higher-rate taxpayers in 2026/27. If you need the rental income to live on today, that second layer narrows the company's lead. If you are reinvesting to build a portfolio, the lower Corporation Tax rate compounds year after year and the extraction question can wait.
Rules of thumb
- Basic-rate taxpayer with one or two lightly-borrowed properties? Personal ownership is usually the simplest route, and Section 24 barely moves the needle for you.
- Higher-rate taxpayer with mortgages and plans to grow? A company increasingly wins, often by a wide margin — especially if you will reinvest the profits rather than draw them straight out.
- Already hold property in your own name? Do not rush to move it into a company. Transferring can trigger Stamp Duty and a Capital Gains Tax bill today, so model the cost before you restructure.
The bottom line
Section 24 quietly turned buy-to-let from a straightforward income play into a tax-planning exercise. For lightly-geared basic-rate landlords, not much has changed. For higher-rate, mortgaged, growth-minded investors, the structure you pick can be the difference between a portfolio that compounds and one that slowly bleeds money after tax. Run your own numbers, and take proper advice before you buy or restructure — the right answer really is specific to you.
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Common questions
Sources
GOV.UK — Tax relief for residential landlords (Section 24), with worked examples, GOV.UK — Corporation Tax rates and GOV.UK — Tax on dividends. See our full methodology and rates.
This article is general information for the 2026/27 tax year and not personalised financial advice. Check your own numbers and verify figures against GOV.UK, and take proper tax advice before you buy or restructure.