Section 24 – What’s the big deal?
I am a regular reader of Property118 and I find it very useful, especially with the vast amount of useful information that’s made widely available through these forums.
I am a BTL investor myself with 9 properties – my credentials are as follows: annual rental income of £65K with finance costs of £18K and maintenance costs of £10K (all my mortgages are on repayment basis and I have another main source of income).
Ever since the section 24 amendment to the Finance Bill was announced, I have been looking at it purely using mental mathematics and scribbled calculations on scraps of papers, but today I modeled it for my circumstances and in reality (for the figures above), I will lose £900 in the tax year 2017-18, £1800 in 2018-19, £2700 in 2019-2020 and £3600 from 2020-21 tax-year onwards.
I appreciate for those with larger portfolios and higher finance costs, there may be a bit more losses with these changes. I don’t want this post to cause any offence, but while it’s a loss – is it really such a big deal??
Comments/challenges will be interesting to read (and learn from)!!
Mervin
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Member Since January 2011 - Comments: 12195 - Articles: 1396
11:44 AM, 2nd November 2016, About 9 years ago
Hi Mervin
You are obviously good with numbers and financial planning and I’m delighted for you that in your case Section 24 doesn’t hit you too hard.
Many people are not good with numbers though and need somebody like me to help them understand the consequences of Section 24 on them personally. In most cases I can suggest something to help, but not always. Forewarned is forearmed though, nobody likes nasty surprises, especially in the form of unexpected tax bills when it’s too late to do anything about it.
Below is a link to a case study for a gentleman I could not help and will be very badly affected despite owning just one rental property. At least he knows what his tax will be now though and can make decisions based on that
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Member Since October 2016 - Comments: 81
1:51 PM, 7th November 2016, About 9 years ago
Mervin, I think it’s fair to say that the impact differs whether you take the view that you are building for capital gains or income. As has ever been the case, those in the property game focused on capital gains run much greater risk and section 24 highlights this…you seem to have a well-balanced income-driven portfolio and as such – you are right, the impacts will be much smaller.