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14/7/25 8:13 pm
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A leading tax expert has revealed that the decision by Chancellor George Osborne (main image) in April 2017 to restrict the amount of mortgage relief landlords can claim against their personal tax bills – known as Section 24 – is the real reason why so many landlords are leaving the sector.
Barry Soraff (main image), speaking during a webinar hosted by Paul Shamplina this week, told those listening that landlords with long-standing portfolios whose earnings are in the higher tax bracket are currently “running for the hills” because they can’t incorporate their portfolios but are being stung by the Section 24 changes.
“Most people since these changes where phased in have built up their portfolios by purchasing properties through a limited company – known as incorporation – and therefore Section 24 doesn’t apply to them,” he says.
But for others who pay higher rate income tax, they’re caught in a position where it’s not worth being a landlord.
But for others, they’re caught in a position where it’s not worth being a landlord.
Soraff, who is a partner at London tax advisory firm Xeinadin, gave an example. “Let’s look at a basic example that will represent what many landlords are experiencing,” he said.
“You’ve got a landlord who is has a job and is earning £95,000 a year, which unfortunately these days doesn’t make you rich, and has a small portfolio of three BTL properties from which they earn £45,000 a year but pay £30,000 in mortgage interest and £7,000 in other costs such as maintenance, leaving an income of £8,000 for the landlord.
“If they weren’t a landlord they would pay HMRC £25,432 in tax, but if you add the rental income from their portfolio, and because Section 24 means they can’t declare most of the mortgage interest against their tax, they now have a total income of £133,000.
“And because they don’t have a personal allowance as their income is over £100,000 and they are paying a higher rate of tax because their income is over £125,000 their tax bill after reliefs is £40,000 so an £8,000 income from their properties means an extra tax of £15,000. That’s why it’s not worth being a landlord. “That is the real world – that’s what is really happening - and that's before you take into account higher mortgage interest rates."
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