I’ve lost count of how many times a landlord has sat across from me at Edward Harris Accountants, looked at their tax bill, and asked, “How is this even possible? I made less profit than last year, but I’m paying more tax?”
That question, nine times out of ten, comes down to one thing: Section 24.
If you own rental property in the UK and you’ve never heard of Section 24, you need to stop scrolling and read this properly UK Landlord. It’s quietly reshaped the buy-to-let market since it was introduced, and it’s the reason so many landlords are now talking about SPVs Let’s get into it.
So What Actually Is Section 24?
Section 24 is the bit of tax legislation that changed how mortgage interest relief works for individual landlords. Before it came in, you could deduct all your mortgage interest from your rental income before working out your tax bill. Simple, sensible, made sense.
Since it was phased in between 2017 and 2020, that’s no longer the case. Individual landlords can no longer deduct mortgage interest as an expense. UK Landlord instead, you get a basic-rate tax credit, currently 20%, on your finance costs, regardless of what tax band you’re actually in.
Here’s why that matters so much. If you’re a higher rate taxpayer, you used to get 40% relief on your mortgage interest. Now you’re capped at 20%. That gap doesn’t just shrink your profit for some landlords; it can push them into a higher tax bracket entirely, even when their actual cash profit has gone down.
I had a client last year, a landlord with four properties in the North West, who genuinely thought his software had made an error. His rental income hadn’t gone up. His costs had gone up. Yet his tax bill was higher than ever. Once we walked through the calculation together, he understood, but he wasn’t happy about it, and honestly, I don’t blame him.
Why Does This Hit Some UK Landlords Harder Than Others?
Not every landlord feels the pain of Section 24 equally, and that’s something people often miss.
If you own your properties outright with no mortgage, Section 24 barely touches you. Congratulations, you’ve dodged one of the messiest pieces of property tax law in recent memory.
But if you’re highly geared, meaning you’ve got large mortgages relative to the property value, this can seriously eat into your returns. And here’s the part that catches people out: because your rental income now counts in full towards your total income for tax purposes, some basic-rate taxpayers get pushed into the higher-rate band without even realising it, purely because of how the calculation works.
Have you checked your own numbers properly since Section 24 came in, or are you still using rules of thumb from years ago? I ask because I see this mistake constantly: landlords budgeting based on old assumptions that simply don’t hold up anymore.
This Is Where SPVs Come In
An SPV, or Special Purpose Vehicle, is basically a limited company set up specifically to hold rental property. And it’s become the go-to workaround for Section 24, for one simple reason: Section 24 doesn’t apply to companies.
Limited companies pay corporation tax on their profits, not income tax. And crucially, mortgage interest is still treated as a normal business expense for a company, deducted in full before you work out the taxable profit. No 20% cap. No creep into a higher band. Just interest, deducted like any other cost of doing business.
For landlords with a sizeable portfolio and heavy borrowing, that difference can be substantial. In my experience, it’s usually the higher-rate taxpayers with several mortgaged properties who see the biggest benefit from moving into a company structure.
But this is a big but: an SPV isn’t automatically the right answer for everyone. I wish more landlords understood that before they rushed off to incorporate.
The Bit Nobody Wants to Talk About: Getting Property Into the SPV
Setting up a company is the easy part. Genuinely, it takes an afternoon.
The hard part is moving existing properties into it. This isn’t a paperwork exercise; it’s treated as a sale from you personally to the company, even though nothing actually changes hands in the way you’d normally think of a sale.
That means you could be liable for Capital Gains Tax on any increase in value since you bought the property. You’ll also likely face Stamp Duty Land Tax on the transfer, calculated on the market value, not what you originally paid. If your properties have gone up significantly in value and let’s be honest, most have this can add up to a genuinely eye-watering cost.
There is some relief available if you’re running your properties as a proper business rather than a passive investment, but qualifying for that isn’t as straightforward as some online guides make it sound. I’d treat any blanket claim of “just transfer it in and claim relief” with real suspicion.
Mortgages Get More Complicated Too
Here’s something people genuinely don’t think about until it’s too late: limited company buy-to-let mortgages are a different beast entirely from personal ones.
Fewer lenders offer them. Rates tend to be a bit higher. And you’ll often need a personal guarantee anyway, which slightly undercuts the idea that the company is a separate entity shielding you from everything.
It’s not a dealbreaker, but it does change the maths. You need to weigh the tax saving against the extra borrowing cost before you get excited about the headline benefit.
So Who Should Actually Consider an SPV?
Honestly? It depends entirely on your numbers, and anyone who tells you otherwise without seeing your specific situation is guessing.
Generally, SPVs make more sense if you’re a higher or additional rate taxpayer, you’re planning to grow your portfolio rather than sell up soon, you’re heavily mortgaged, and you don’t need to draw all the rental profit out as personal income straight away.
That last point matters more than people realise. Profits left inside a company are taxed at corporation tax rates, which are often lower than higher rate income tax. But the moment you want to take that money out personally through dividends, you’ll pay tax again at that point. It’s not always the clean win it looks like on paper.
If you’re a basic rate taxpayer with one or two properties and modest mortgages, an SPV might genuinely cost you more in fees, admin, and mortgage rates than it saves you in tax. New landlords especially get sold on the idea of “everyone’s doing it” without checking whether it actually applies to their situation.
What I’d Actually Tell You to Do
Run the numbers both ways before you commit to anything. Not a rough estimate scribbled on the back of an envelope, but a proper comparison of your after-tax position as an individual landlord versus through a company, factoring in the transfer costs, the mortgage differences, and how you actually plan to use the profits.
The Property Accountant can tell you about. I’ve seen landlords rush into incorporating because a forum post told them to, only to find out two years later that their circumstances didn’t warrant it and they’d handed thousands over in Stamp Duty and CGT for a tax saving that never materialised.
Section 24 was a genuinely painful change for a lot of landlords, and I understand the instinct to fight back against it. But an SPV isn’t a magic fix; it’s a structural decision with real costs attached, and it only pays off for the right kind of portfolio. Get proper advice before you move a single property, because unwinding a bad decision here is far harder, and far more expensive, than making the right one from the start.
