If you’re a landlord in Slough, you’ve likely already felt the effects of Section 24 — the rule that changed how mortgage interest relief works for buy-to-let properties. But there’s a second, less-discussed change now confirmed for April 2027 that will affect your tax bill again, and this is the right time to start planning for it rather than reacting when it arrives.
Section 24: A Quick Recap of Where Things Stand
Since April 2020, individual landlords have not been able to deduct mortgage interest as a normal expense against rental income. Instead, you pay tax on your full rental income, then receive a tax credit worth 20% of your mortgage interest costs.
A worked example: A landlord with £20,000 in rental income and £12,000 in mortgage interest pays tax on the full £20,000 — not the £8,000 profit you’d expect under the old system. They then receive a credit of £2,400 (20% of £12,000). For a higher-rate (40%) taxpayer, this means effective tax of £8,000 − £2,400 = £5,600, rather than the £3,200 they’d have paid under the pre-2020 rules.
The restriction applies to mortgage interest, arrangement and broker fees, interest on loans for property improvements, and Islamic finance payments. It does not apply to capital repayments, insurance, letting agent fees, or repairs and maintenance — these remain fully deductible as before.
This hits basic-rate (20%) taxpayers very little, since the credit broadly matches what they’d have received anyway. It’s higher-rate and additional-rate taxpayers — the 40% and 45% brackets — who lose out significantly, since they only receive a 20% credit regardless of their actual tax rate.
What’s New: Property Tax Rate Changes From April 2027
From April 2027, rental income will be taxed under new, dedicated property tax rates — separate from the standard income tax bands most people are used to. The confirmed rates are 22%, 42%, and 47%, compared to the current standard rates of 20%, 40%, and 45%.
There is a small offsetting change alongside this: the Section 24 finance cost credit will be recalculated at the new 22% property basic rate rather than the current 20%. This means the credit itself becomes very slightly more generous — a small partial offset for landlords with significant mortgage costs, but nowhere near enough to cancel out the higher headline rates for most landlords.
What this means in practice: if you’re a higher-rate taxpayer with rental income, you should expect your tax on that rental income to rise from April 2027, even before accounting for any other changes to your finances. This is worth factoring into cash flow planning now, not in March 2027.
The Big Question: Should You Move Property Into a Limited Company?
This is the question we’re asked most often by Slough landlords, and the honest answer is: it depends, and it’s rarely a straightforward yes.
Why incorporation can help:
Limited companies are not subject to Section 24 restrictions at all. Mortgage interest is deducted as a normal business expense before Corporation Tax is calculated. Current Corporation Tax rates are 19% (small profits rate, profits under £50,000) and 25% (main rate, profits above £250,000), with marginal relief in between — in most cases, a rate substantially below the 40% or 45% an individual higher-rate taxpayer would otherwise face.
Why it’s not automatically the right move:
Transferring existing properties from personal ownership into a company isn’t a simple paperwork exercise — it’s treated as a sale for tax purposes. This means:
- Stamp Duty Land Tax (SDLT) is payable on the market value of the property, including the additional 5% surcharge that applies to most company purchases of residential property.
- Capital Gains Tax is due on any gain between what you originally paid and the property’s current market value — even though you’re not actually selling to a third party.
- Extracting profit from the company later (via salary or dividends) is taxed again at the personal level, which changes the overall efficiency calculation depending on whether you plan to reinvest profits in the company or draw them out regularly.
For a landlord with one or two properties and modest gearing, the transfer costs can easily outweigh the ongoing tax saving for many years. For a landlord with a larger, highly-geared portfolio paying substantial higher-rate tax on rental income, the calculation often looks very different.
Other Options Worth Considering First
Incorporation isn’t the only lever available, and for many landlords a smaller change makes more sense before considering a full restructure:
Spouse or civil partner income splitting. If you’re married or in a civil partnership and one partner pays a lower rate of tax, a Deed of Trust combined with a Form 17 election to HMRC can reallocate rental income toward the lower-earning partner, reducing the household’s overall tax bill — without triggering a full sale for CGT purposes.
Reviewing your gearing level. Some landlords have found that gradually paying down higher-interest mortgages reduces their exposure to Section 24’s impact over time, particularly where refinancing at a lower rate is also an option.
Getting the expense claims right. The distinction between a “repair” (fully deductible) and an “improvement” (treated differently) is one of the most common areas landlords get wrong, and mixing the two up can mean under-claiming legitimate expenses or over-claiming and facing problems later at enquiry.
How This Interacts With Making Tax Digital
If your rental income (combined with any self-employment income) exceeds £50,000, you’re also now required to comply with Making Tax Digital for Income Tax — quarterly digital reporting rather than a single annual return. We covered this in detail in our guide to Making Tax Digital for Slough landlords. It’s worth reading both articles together if you’re affected by both changes, since your MTD reporting and your Section 24/incorporation planning aren’t separate decisions — they both depend on the same underlying numbers.
What Slough Landlords Should Do Now
- Model your actual numbers, not general rules of thumb — the right answer depends heavily on your specific tax band, gearing level, and portfolio size.
- Don’t wait until March 2027 to think about the new property tax rates — cash flow planning now avoids a scramble later.
- Get a professional incorporation comparison before transferring anything — the SDLT and CGT costs of getting it wrong are far higher than the cost of proper advice upfront.
- Check your expense claims are correctly categorised — this is a free win available to every landlord, regardless of ownership structure.
How Direct Assist Accountants Can Help
We work with landlords across Slough, Langley, Windsor, and the wider Berkshire area to model exactly this kind of decision — personal versus company ownership, Section 24 impact, and MTD compliance together, rather than as separate conversations. Our dedicated landlord accounting service already covers Section 24 planning and Capital Gains Tax as standard.
If you haven’t reviewed your property tax structure since Section 24 fully phased in, or you want to understand how the April 2027 changes will affect you specifically, get in touch for a free consultation and we’ll go through the numbers with you.
This article reflects confirmed UK tax rules as of the 2026/27 tax year and the announced April 2027 property tax rate changes. Rules and thresholds can change; for advice specific to your circumstances, speak to a qualified accountant.