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  • Tax

    S24 ... for a simple man :)

    Nigel as you know 20% tax up to £45k

    looking at your figures rent off £6,900 minus the interest element of your mortgage £1800 your income is £5100

    I would take it you will also have some expenses on top to deduct.

    It doesn't work as a MINUS unless your expenses exceeded £5100.

    If your total income as above after taking out any other allowable deductions doesn't exceed £45k you will NOT be affected by S24

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    First ignore Paul when he tries to explain S24.

    Last year you took your rental income deducted your finance costs (interest mainly) and other costs to get your profit from renting. Then you added your other income and calculated your tax based on that.

    When S24 full applies you take your rental income deuct your non-finance costs and add your other income  and calculate your tax based on that figure. Then you subtract 20% of your interest as tax relief.

    The difference between the twonumbers upon which your tax is calculated  is equal to the interest you are paying giving the illusion that that is what being taxed, but in both cases the more interest you pay the less tax you pay. If you pay £10,000 interest then with S24 you get a relief od £2,000 pouns and pay that much less tax. Of course you are still taking home £8,000 less overall compared to not paying interest. The difference is that the deduction is smaller and comes at a later stage in the calculation.

    S24 can cause some one to move to a higher tax band as your tax is calcuated based on a higher number if you are paying interest.

    But if you are a basic rate taxpayer and remain one you pay extra tax equal to 20% of your interest and get a relief of exactly the same amount so it makes no difference,

    This year (FY2017/18) ou can deduct 75% of your interest before calcuating your tax and then get a relief of 20% on the other 25%. Next year it will be 50:50 then 25/75 until in FY2020/21 when it applies fully.

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    It is pointless saying ignore me.

    The calculators don't lie.

    It matters not why or how

    But the facts are mortgage interest increases and other finance costs result in MORE tax being paid without a commensurate increase in profits.

    It matters not how this increased tax bill occurs

    So even if I don't know why S24 increases my tax bill it simply doesn't matter.

    All I need to know is that S24 gives me a larger tax bill without any increase in rental income

    That is the crux of the S24 problem

    LL  like me simply aren't interested in the semantics of S24

    All we know is that for no increase in rental income we are now paying more tax

    That  is the ONLY important fact of S24.

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    If the calculators aren't lying then you are. You persist is saying things that are not true.

    But the facts are mortgage interest increases and other finance costs result in MORE tax being paid without a commensurate increase in profits.

    That is not a fact. It was not true under the old system and is not true under S24 either.

    All I need to know is that S24 gives me a larger tax bill without any increase in rental income

    That is true (assuming you areN a higher rate taxpayer) but is not the same thing.

    Maybe this will be simple enough for you to understand.

    • S24 increase the tax that LLs with high incomes have to pay.,
    • Interest rate rises still reduce the tax that mortgages LLs have to pay. but the reduction is less with S24.
    • The reduction in tax is less than the increase in interest payments so mortgaged landlords are worse off  after a rate rise.


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    Yep for all that you have advised is the reason I'm getting out of the PRS.

    I'm simply not prepared to be taxed on fictitious  income.

    I will be possibly earning the same net money by the lodger route

    I'm looking for 4 /5 bed properties even now that I can live in and take on two lodgers.

    I don't know what I might do with the a spare room!!!!!!!

    I'll have to have a think about that!!!

    Goodbye tax bills hello loadsemoney!!!

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    Hi Nigel.


    I have found mortgage works have a excel spreadsheet which helps deliver the answers you are looking for.


    Put your figures into the spreadsheet and it will give you your figures.


    The link - https://www.themortgageworks.co.uk/includ...lator.xlsx



    if the link doesn’t work search for mortgage works section 24 spreadsheet”

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