Section 24 is eating my rental profit: should the properties go into a company?

Written for portfolio landlords, letting and managing agents, HMO operators and short-let operators in England, Wales, Scotland and Northern Ireland.

The short version

1. Work out what section 24 costs yearly.You get a basic-rate credit for mortgage interest, not a deduction. Compare your tax with what full relief would give.
2. Price the move into a company.Capital gains tax on the gain, not the market value, plus SDLT (LBTT in Scotland, LTT in Wales) and any refinancing costs.
3. Divide the upfront cost by the yearly saving.That is your payback in years. Check any relief genuinely applies, and get written advice from a tax adviser first.

Own rental property in your own name with a mortgage and you no longer deduct the interest: you get a basic-rate tax credit instead. For a higher-rate landlord that gap costs money every year, so the question is whether a company would do better, and the answer turns on what it costs to get there.

What moving into a company costs up front

In England and Northern Ireland your company pays Stamp Duty Land Tax (SDLT) on the market value of the properties it takes on (FA 2003 s53). In Scotland the tax is Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT), which differ, so the example below is for England. You may also owe capital gains tax on the gain, which is not the market value: allowable base cost and disposal costs come off first. In the example the 4 flats are linked, multiple dwellings relief ended on 1 June 2024, and the non-residential election needs 6 dwellings, so the higher residential rates apply.

Holding homes in a company has its own traps. A company buying a home worth over £500,000 in England or Northern Ireland pays SDLT at 17% unless relieved (relief still leaves the higher rates), and a company holding one files an annual tax on enveloped dwellings (ATED) return by 30 April. Capital gains tax on a UK residential sale is reported and paid within 60 days of completion, so plan the cash. As of Oct 2026.

Rules that matter whichever way you hold

• Repairs are revenue and improvements are capital. Whether the property was lettable before the work can decide which side a large repair falls (Law Shipping; Odeon).
• Replacement of domestic items relief covers furnishings you replace (ITTOIA 2005 s311A).
• Property losses carry forward against property profits only.
• Married couples who own a rental jointly are taxed 50:50 on its income unless a Form 17 is filed within 60 days of the declaration (ITA 2007 s837).
• Holiday lets: since furnished holiday let relief ended on 6 April 2025, profits are ordinary property income unless hotel-type services make it a trade. Unlike exempt long lets, they are standard-rated for VAT above the £90,000 threshold, and in England business rates replace council tax only if the let will be available for 140 days in the coming year and was available for 140 and actually let for 70 in the last. As of Oct 2026.
• Whether you have to join Making Tax Digital for Income Tax is tested on gross income, not profit. If you are in it, quarterly updates are due by 7 August, 7 November, 7 February and 7 May. As of Oct 2026.
• If you are a letting agent collecting rent for a landlord who lives abroad, deduct basic-rate tax from the net rent unless HMRC has approved gross payment: for example, £352 a month at 20% on £1,760 of net rent. Register with HMRC, pay within 30 days of each quarter end, and file the annual return by 5 July. As of Oct 2026.

In the worked example it takes about 34 years of savings to repay the upfront tax.

Asked in Greymill

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