Section 24 of the Finance Act 2015 phased out finance-cost relief for individual residential landlords, replacing it with a basic-rate tax credit. The headline effect is well-known: highly geared portfolios held in personal names pay materially more tax than they used to. The structural questions that follow are still relevant in 2026.
Where the rules sit today
- Mortgage interest is no longer deductible against rental income for individuals.
- Instead, a 20% tax credit is given on finance costs after computing tax on the gross rent.
- Limited companies are unaffected — finance costs remain fully deductible.
- The interaction with personal allowance, child benefit, and student loan thresholds is meaningful.
Structuring options that still work
There is no single correct answer — only a correct answer for a specific portfolio, gearing level, and time horizon. Three options come up most often.
- Hold new acquisitions in a limited company (an SPV). Most common for new buys; rarely worth retrofitting existing properties due to SDLT and CGT on the transfer.
- Mixed structure — keep low-gearing properties in personal names, route new acquisitions through an SPV.
- Form a partnership and incorporate after several years, taking advantage of incorporation relief — viable but specialist.
What to model before deciding
Build a 10-year projection that compares net-of-tax cash flow under each structure. Include SDLT and CGT costs of any transfer, the company's corporation tax liability, dividend extraction tax, and the loss of the personal CGT allowance. The right answer is rarely obvious without the model.
