If your tax bill has crept up while your rental income has stayed roughly the same, Section 24 is very likely the reason. Here at LJY Accountants we are experts in property management and accounting.
It is the single biggest driver behind why Scottish landlords are now asking whether a limited company makes sense for them. Here is what it actually does, who it hurts, and what is really involved in restructuring.
What Is Section 24 and Limited Company?
Section 24 changed how mortgage interest is treated for individual landlords.
Before: you deducted mortgage interest in full as a business expense, then paid tax on what was left.
Now: for property held in your own name, that deduction is gone. You get a flat-rate tax credit at the basic rate instead, applied after your rental income has already been taxed, not before.
If Section 24 is squeezing your tax bill, our Landlord Tax & Compliance page covers how we can help you stay compliant while keeping more of your rental income.
Why It Hits Some Landlords Far Harder Than Others
If you are a basic-rate taxpayer, the impact is usually small. The credit roughly matches the relief you would have had anyway.
If you are a higher or additional-rate taxpayer, it is a different story. The credit is fixed at the basic rate no matter what band you are in, so you lose a meaningful chunk of relief you used to get.
There is a second sting. Because your gross rental income now counts towards your tax position before finance costs, Section 24 can push you into a higher band than you would otherwise sit in.
The landlords worst affected: those with large mortgages relative to their rental income. Nothing about the property has changed, but the tax bill has.
Why Landlords Are Looking at Limited Companies
Section 24 only applies to property held in an individual’s own name. Inside a limited company, mortgage interest is still a normal deductible business expense.
Profit is then taxed at corporation tax rates rather than personal income tax rates.
For heavily leveraged landlords, higher-rate taxpayers, and anyone growing a portfolio, that difference adds up. It is why “should I hold my properties personally or through a company?” is one of the most common questions we are asked by property investors across Scotland.
Personal Name vs Limited Company: The Quick Comparison
Personal name: Mortgage interest basic-rate credit only | Tax on profit at income tax rates | Getting money out it is already yours | Admin via Self Assessment | Wider mortgage choices
Limited company: Mortgage interest fully deductible | Tax on profit at corporation tax rates | Getting money out via salary or dividends | Admin via company accounts and filings | Limited company mortgage products only
Four Things to Weigh Up Before You Restructure
Moving existing property into a company is not just relabelling ownership, and it is not right for everyone.
1. It is usually treated as a sale and purchase.
Transferring property you already own typically triggers Capital Gains Tax, plus Land and Buildings Transaction Tax and the Additional Dwelling Supplement here in Scotland.
2. Your mortgages need reworking.
Personal buy-to-let mortgages generally cannot transfer to a company. You will need limited company products, and rates and criteria differ.
3. There is more ongoing admin.
A company has its own filing obligations, separate accounts, and rules on how and when you take profit out.
4. New purchases are a different question entirely.
Buying into a company from day one avoids all the transfer costs above. That is a far more straightforward decision than moving what you already hold.
So Is It Right for You?
There is no single answer. It depends on your income, how leveraged you are, whether you are buying or restructuring, and your long-term plans for the portfolio. Why not book a consultation with us to discuss Section 24 and limited company?
The upfront cost of incorporating an existing portfolio can be significant. It is worth running your actual numbers rather than going on rules of thumb — and for Scottish landlords, LBTT and the Additional Dwelling Supplement need to be part of that calculation.
Weighing up whether to restructure? Our Property Tax Planning & Structuring page walks through the LBTT, CGT and Corporation Tax trade-offs in more detail.
Frequently Asked Questions
Should I hold my rental properties personally or in a limited company?
It depends on your tax band, how leveraged you are, and whether you are restructuring or buying new. A company can offer better treatment of mortgage interest, but incorporating existing property brings its own costs.
Does Section 24 apply to limited companies?
No. It only restricts mortgage interest relief for property held in an individual’s personal name.
Will I pay Capital Gains Tax if I move property into a company?
Transferring property you already own is generally treated as a disposal, so CGT can apply — alongside LBTT and the Additional Dwelling Supplement in Scotland.
Is it cheaper to buy new property through a company?
Often, yes, because you avoid the transfer costs of moving existing property. The ongoing admin still applies.