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  • Tax

    Increasing rent to cover Section 24 tax bill

    There is a back of the fag packet calculation that lets you know how much you would need to increase your rent by to cover the extra s24 tax due from 2020/21. 

    If you’re a higher rate tax payer the extra rent you would need is 33.33% of your interest bill. This is unrealistic but shows one of the dramatic effects of s24. If you’re a big softie like me and don’t tend to increase your rent then at least increasing rent to the market rate could make your situation better than it was before.

    This calculation does not apply to those who end up paying the child benefit charge or who lose their personal allowance.                                                                                                                                  EDIT: I’ve edited my post as I had badly worded it and can see how I gave the impression that I was advocating that  LLs should increase rent by 33.33%. Nothing could have been further from my mind. The market determines rent levels, not LLs. Please accept my abject apology.
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    What percentage if your a lower rate tax payer?
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    Lower rate taxpayers are not affected by S 24

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    Just be careful - S24 can push you into higher rate tax bracket !!

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    No.

    Increasing your income can push you into a higher tax bracket, all s24 does is deny you the ability to deduct your mortgage interest expense.


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    Yes thats why it can push a Landlord into higher tax because you only get a 20% Tax credit with S24


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Please elaborate.

    You seem to be suggesting you can still deduct full mortgage interest from rental income before tax, but only if you are a lower rate taxpayer.

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    Regardless of your status as a taxpayer, you cannot deduct mortgage interest as an expense (from next year)

    I appreciate that that fact could put you in the higher tax bracket, so DL is correct in that respect, my apologies if I have added to the confusion

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    Thanks. It was just worth clarifying that.

    I used The Mortgage Works s.24 calculator to support my decision to stop letting my highest mortgage/rental income property. It was better to leave it empty while I was still working! Now I'm selling and will use the equity to buy a Holiday Let by the sea! One more desperately needed rental property lost to the London market.

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    Market Forces will determine if you can put the rent up, not the imposition of S 24

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