Property investment remains one of the most popular ways to build wealth in the UK — but the tax landscape for landlords has changed significantly since 2017.
The Section 24 Mortgage Interest Restriction
The biggest change affecting landlords in recent years is Section 24. From April 2020, individual landlords can no longer deduct mortgage interest from their rental income. Instead, you receive a basic rate tax credit (20%) on your finance costs.
This change hit higher and additional rate taxpayers hardest and pushed many into higher tax brackets.
Example: A landlord with £24,000 rental income and £12,000 mortgage interest used to pay tax on £12,000. They now pay tax on £24,000, then claim a 20% credit on the £12,000 — resulting in significantly more tax overall.
What Landlords Can Still Claim
Despite Section 24, landlords can still deduct:
- •Letting agent fees
- •Maintenance and repairs (not improvements)
- •Ground rent and service charges
- •Buildings and contents insurance
- •Accountancy fees
- •Council tax and utilities (if you pay them)
- •Advertising costs
Note: capital improvements (like a new kitchen) cannot be deducted — only repairs to restore the property to its original condition.
The Wear and Tear Allowance — Gone
The old flat 10% wear and tear allowance for furnished properties was abolished in 2016. You can now only claim for actual replacement items.
Capital Gains Tax on Sale
When you sell a rental property, CGT applies to the gain. The CGT rates for residential property are 18% (basic rate) and 24% (higher rate) from April 2024.
You get an annual CGT allowance — currently £3,000 (2024/25) — before CGT kicks in.
Private Residence Relief (PRR) can reduce the gain if you ever lived in the property. Lettings relief has been significantly restricted and now only applies where the owner and tenant co-habit.
Should You Incorporate?
Some landlords have transferred or are starting new portfolios in a limited company. Companies pay corporation tax (19-25%) on rental profits and are not subject to Section 24 in the same way.
However, the transfer itself can trigger a CGT event and SDLT on the market value — so the numbers need to be modelled carefully before making any move.
Our Landlord Services
We advise individual landlords and property investors across Manchester and beyond. We can model the impact of incorporation, optimise your self-assessment, and ensure you're claiming everything you're entitled to.