Section 24 turned mortgage interest from an expense into a 20% tax credit. For higher-rate landlords that flips many cash-positive properties into losses once rates rise.
-£2,100 cash flow after tax · Section 24 applied at 40%
Cash-negative under Section 24. The only paths to fix this are: hold via a limited company (interest fully deductible there), raise rent meaningfully, or refinance to a lower rate. For new BTL deals at higher-rate marginal income, the Ltd Co route is usually the default now.
Section 24 means mortgage interest is not deductible from rental income for individual landlords; you get a 20% tax credit on it instead. SDLT shown is the additional-rate (BTL / second-home) variant at the post-Autumn-2024 5% surcharge. Capital appreciation not modelled.
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Additional-rate SDLT: 5% surcharge across the whole price (raised from 3% in Autumn 2024) on top of the standard bands. On a £400k property that's roughly £30k of SDLT alone, often 1-2 years of net rent gone on day one.
Yield is the cash-flow story. Total return = yield + capital appreciation. UK property has averaged around 5% nominal capital growth long-term but flat-to-down in real terms over the past decade. Treat yield as the primary return source; appreciation is upside, not a base case.
For higher-rate landlords post-Section 24, holding BTL via a limited company is often the default: mortgage interest is fully deductible, profits taxed at corporation tax (19-25%), then dividend tax on extraction. Adds admin overhead and lender restrictions, but improves net for most higher-rate landlords with 2+ properties.