E-BOOK
Section 24 Explained
Eight chapters on why a profitable landlord can owe more tax than the property made, and what to do about it. Chapters two and four are the arithmetic. Chapter eight is what you can actually do, which is shorter than anyone would like, and more honest for it.
- Eight chapters, four tables, one worked landlord throughout
- The reduction worked as the lower of three, not 20 per cent of the interest
- The interest table where tax crosses profit, row by row
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Who this e-book is for
Any landlord with a mortgage on a rental, and especially anyone whose tax bill has grown while their profit has not, who wants to see the mechanism rather than be told the conclusion.
You have been told it is a 20 per cent credit and left it there
The reduction is 20 per cent of the lowest of three amounts: your finance costs, your property profits, and your adjusted total income. Chapter two works all three, because a calculator that skips the caps overstates the relief for exactly the landlord who needs the answer, and chapter five follows the unused interest as it carries forward.
You are basic rate and assume this is someone else’s problem
Mostly true, and chapter three says so plainly: at basic rate the reduction is worth what the deduction was, and a company is not restricted at all. The catch is that the gross rent counts toward your bands before the interest comes off, so rent you never kept can push you into higher rate, and then it is your problem.
Your fix is coming up for renewal
Chapter six is the one to read first. Before 2017 a higher rate landlord felt about sixty per cent of a rate rise, because the extra interest reduced the taxable profit. Now you feel nearly all of it. On the worked £200,000 mortgage the landlord is £5,854 ahead at 4.5 per cent and £546 behind at 8.5, with the rent unchanged throughout.
FACTS
The table the book
is built
Rent of £24,000, costs of £4,000, a £45,000 salary, and the interest rising row by row. At £15,000 of interest the tax is £3,946 on £5,000 of profit. At £17,000 it is £3,546 on £3,000, and the tax has passed the profit. At £19,000 the landlord keeps £1,000 and owes £3,146.
8 chapters
Four tables
25p
What each pound of interest costs an additional rate landlord
FACTS
What you can actually do
Reduce the borrowing, shift beneficial ownership to a lower earning spouse before the income arises, make a pension contribution that extends the basic rate band, time repairs before 5 April, and keep the carried forward balance recorded so a better year actually relieves it. The company route is chapter seven, priced honestly at about eleven years to break even.