The affect of Section 24 on your income will depend on which tax band you fall into.
For lower income earners, the effect will be minimal. For landlords with large portfolios, the impact could be significant.
Let’s take the same example above but compare the results from before Section 24 was introduced:
You can deduct your mortgage interest from your rental income so only pay tax on £10,000.
Basic rate taxpayers pay £2,000. Higher rate taxpayers pay £4,000.
As you can see, basic rate taxpayers see no difference as you can claim back the 20% you would have deducted previously.
On the other hand, higher rate taxpayers will need to pay an extra £1,000 in tax. If you’ve got a larger portfolio with several buy-to-let mortgages to pay, the increase in tax could be considerable.
You’ll also need to remember that other costs can no longer be deducted so you’ll also have to pay tax on any mortgage admin fees.