Brighton landlords and Section 24: what it means for your tax bill

If you own buy-to-let property in Brighton and Hove, Section 24 is probably costing you more than you realise. Since April 2020, this legislation fundamentally changed the way residential landlords are taxed on mortgage interest.

What is Section 24?

Before April 2017, landlords could deduct full mortgage interest costs from rental income before calculating tax. Section 24 abolished this. Now landlords receive a basic rate tax credit of 20% on mortgage interest — not a full deduction. For higher rate taxpayers, the difference can be enormous.

How Section 24 affects Brighton landlords

Suppose you earn £60,000 from employment and £18,000 in rental income, and pay £10,000 per year in mortgage interest.

Who is most affected?

• Higher or additional rate income tax payers
• Landlords with large mortgages relative to rental income
• Those with multiple mortgaged properties
• Landlords whose rental income pushes them into a higher tax band

What can Brighton landlords do?

1. Incorporate into a limited company

Limited companies are not subject to Section 24 and can still deduct mortgage interest as a business expense. For landlords with large portfolios or high income, incorporating can significantly reduce their tax burden. However, transferring existing properties triggers SDLT and potentially CGT — so the numbers need careful modelling.

2. Purchase new properties through a company

Even if transferring existing properties doesn't make sense, buying new properties through a limited company from the outset avoids the transfer problem entirely.

3. Optimise allowable expenses

Many landlords aren't claiming everything they're entitled to — maintenance, letting agent fees, insurance, accountancy costs, and more.

4. Consider pension contributions

Making pension contributions reduces your adjusted net income, which can bring you below the higher rate threshold and reduce the Section 24 impact significantly.