Section 24: The Consequences for Tenants

The Section 24 debate rages on. This is the part of the Finance Act 2015, which changed the rules on landlords being able to claim back mortgage interest and offset it against rent, as well as increasing their taxes.

The property site Property118 recently featured a series of discussions with landlords, highlighting the consequences that Section 24 has had so far for their businesses. In fact, as will become clear, it’s more a case of the consequences that Section 24 has had for the tenants, not least those tenants who are on housing benefit. The site is actually collecting views from landlords that can be used in discussions with politicians, local councils and housing charities.

There are some revealing stories from landlords. As expected, in order to stay in business, many are having to pass on the rises in costs which they have suffered as a result of Section 24. If they don’t do this, they basically no longer have a business. A landlord named John explained that he had had to tell a tenant that rent would be going up, after being held for two years. That tenant moved on. He is now going to have to tell a number of other long-term tenants (some in residence for more than eight years) that their rent, too, will be going up. Tenants in M8 lettings can expect similar news.

This landlord gives his tenants a discount for being a responsible tenant. He is expecting the tax on each property to increase by about £2,000 a year. In order to break even given the new levels of taxation and the loss of mortgage interest tax relief, he would have to put his rents up by 20%. But the tenants will not be able to pay this, and he is therefore thinking of selling his properties which he had intended to provide his pension income.

Another landlord, Martin, pointed out that these extra taxes were not included in the Conservative party’s manifesto. He charges new tenants the market rate for their rent but after that he increases the rent very little, and some have no further increases for many years. All of these tenants now face very large rises in rent as he attempts to balance the books.

He feels that it is particularly unfair on landlords who have one or two buy-to-let properties and also work, because they are the ones that will fall under higher rate taxation with the result that they will barely be covering their costs. He feels that if mortgaged buy-to-let landlords are forced to sell, it will be to the great advantage of un-mortgaged landlords who will be able to step in and pick up properties very cheaply, and that this is a form of wealth transfer. The gainers will be the very rich with large buy-to-let portfolios, or corporate landlords.

Another landlord, Colin, has tenants who are mostly on housing benefit, but some of these have lived in his houses for over 10 years and all of his tenants are long-standing. He charges rents based on LHA which are therefore below market value. He wrote to his tenants some months ago warning them that rents would have to go up and that he would have to dispose of some of his houses.

One family could not afford any increase in rent and has gone to share the same property as other members of their family. Another tenant has asked for notice in the hope that they will be rehoused by the council. Other tenants have agreed to an increase of 15% in their rent – still below market value.

He feels that people are becoming homeless, and that very poor people who are already stretched are having to find more money for rent.

Another landlord, Chris, says that he has never increased the rent of an existing tenant. He owns 39 properties and half of his tenants are on some kind of benefit, including in-work benefits for people who on tough employment contracts. Some tenants have been with him for nine years and in total he provides housing for about 70 people.

There are other landlords in the conversation and three things come up repeatedly. First, that all of these landlords are going to have to put up rents. Second, that many of them are thinking of selling out at least part of their portfolio. Third, that they will never ever vote Conservative again.

What experts and commentators have to say about Section 24

These quotes have been taken from the recent publication by Property 118 titled: “SECTION 24 of the Finance (no.2) Act 2015: “The unjust legislation that will make the UK housing crisis much worse”

Richard Dyson, Finance Editor at The Telegraph:

…It is a tax from Alice in Wonderland, a truly bonkers tax, a tax you’d laugh at – if it were being applied in a Third World country by a lunatic dictator.’


The Institute of Chartered Accountants of England and Wales:

‘The idea that landlords will be taxed on the profit of their businesses, but not be allowed to offset the costs of creating that taxable profit is absurd, unjust and unsustainable. It overturns a fundamental, centuries-old principle of taxation.’

Paul Johnson of The Institute of Fiscal Studies:

‘This line of argument [about the ‘level playing field’] is plain wrong. Rental property is taxed more heavily than owner occupied property.’

Read all the expert feedback in the Full Report from Property118 

Changeover to universal credit is driving people into long-term debt

Changeover to universal credit is driving people into long-term debt


When her daughter turned five in November, Alexa Clarke couldn’t afford to celebrate. Nor could she afford to heat her house, put healthy food on the table, or buy her daughter new shoes for school. The five-year-old’s birthday had seen Clarke’s benefits halted and her transition on to universal credit (UC), the government’s flagship welfare reform that rolls six benefit payments, currently paid weekly or fortnightly, into one monthly lump sum. It took seven weeks for Clarke’s first UC to arrive, and she had only an advance of £447, which she had requested as an emergency interest-free loan to live on, as the bills piled up.

“I was scared to even pick my daughter up from school sometimes because I felt like I was failing her,” says Clarke, whose name was changed for this story. “Everyone else was carrying Christmas shopping and I couldn’t even keep my house warm.”

Tameside, in Greater Manchester, was the first local authority to initiate the welfare reform programme in 2013. Clarke, 24, had been living on weekly and fortnightly benefit payments since her daughter was born before being moved on to UC last year. She had never missed a rent payment, and had mastered the art of budgeting her benefits. But just as her daughter started school and Clarke began applying for restaurant jobs, everything fell apart. In the wait for initial payment, the heating shut off, then the electricity failed, Clarke’s phone credit ran out, and she had no choice but to approach a nearby foodbank.

At the same time, an adviser at Tameside’s Jobcentre Plus insisted she spend 25 hours each week looking for work, or risk sanctions, a condition of the new UC. Clarke couldn’t even afford the bus fare she needed to hand out her CV to local restaurants.

In May, UC will extend to all new claimants of jobseeker’s allowance, employment and support allowance, income support, housing benefit, working tax credit and child tax credit. It is currently paid to more than 175,000 claimants who are registered at 550 jobcentres across the UK and full transition is scheduled for completion by 2020.

The government says UC will encourage personal budgeting, improve incentives to work, and respond flexibly to the transition into work. But research by citizens advice bureaux and social housing landlords has found that the wait for initial payment, usually five or six weeks, can throw claimants like Clarke into short-term crisis that often spirals into long-term debt.

Sixteen citizens advice branches found that up to June 2015, almost 30% of their clients on UC had waited more than seven weeks for the first payment. When the money arrives, the bills get paid, but the debt continues to take its toll.

When Clarke’s first cheque for £935 arrived on January 13, a monthly sum of £74 had been skimmed off as a partial payment for the advance she had received. She owed £1,000 in rent, so she handed over £400 to her social landlord. A recovery proceedings letter from Tameside council had arrived in the post, too. She had missed council tax payments and it threatened to take her to court.

“It’s like it’s set up for you to fail,” Clarke says. “I want to get into work, but they now want me to spend money searching for jobs within 90 minutes of home, for 25 hours each week, when they’ve deducted my money and I’m worse off than ever – when I’m in arrears.”

Nigel Morgan, the chief executive of the Tameside Citizens Advice Bureau, says that since the expansion of UC in the area, rent arrears and other forms of debt have snowballed. “People are borrowing money to cover short-term losses and then struggling to pay it back,” he says. “And, anecdotally, loan sharks are hitting the most vulnerable people.”

When the National Federation of Almos (NFA), surveyed its members, who manage more than 500,000 council homes across England, on arrears in October and November last year, the policy director Chloe Fletcher had to doublecheck the figures. They showed that 89% of UC claimants in social housing had fallen into rent arrears, compared with 31% of all social tenants. “In my time researching rent arrears, I’ve never seen figures like that for a cohort of tenants,” says Fletcher. She has worked in housing policy for 19 years.

The arrears often plague tenants for months, or even years, and they also pose an extra burden on social landlords and housing associations. New Charter Group, Clarke’s social landlord, found that tenants on UC have seen arrears grow 14% on average since they transitioned onto UC. New Charter also estimates that once universal credit is rolled out to all its 7,500 eligible tenants, it could see a 25% increase in overall debt. Fletcher says that the financial stress of these arrears could mean cuts to new building plans, repair and maintenance services, or tenant support work.

In Sutton, south London, where a small digital pilot of universal credit is now under way, the council’s social landlord is trying to mitigate major arrears. It tracks tenants who are moving on to UC, identifying those with a history of late payments, and advising them to request that housing fees be paid direct to the landlord upfront. In this setup, the claimants also forfeit 10%-20% of their remaining monthly allowance to gradually pay landlords back for existing arrears.

While Monica Prempeh, 57, was waiting for her first UC payment in Sutton, she borrowed cash from each of her three daughters. She was already late on her rent payments, and she would now miss council tax, gas and electric bills, too. She needed to use a baffling computer service to search for jobs and log her hours, but she barely understood it. The stress debilitated her, and for days at a time she couldn’t leave the house. Her doctor wrote her a prescription for anti-anxiety medication.

It wasn’t until Paul Vandi, the income manager at Sutton Housing Partnership, told her not to fear eviction that she began to relax. Together, they submitted a request to the DWP to redirect housing payments and an additional small monthly arrears payment to SHP. Once they had scheduled an automated payment on her debt, Sutton’s social landlord had no reason to take her to court.

Vandi, for one, sees this as the silver lining to UC. The wait for the initial payment is a problem, he admits, but tenants who set up rent and payback plans for landlords are protected from eviction, even if they live on tighter budgets in the meantime.

But for most, the glint of a silver lining is barely visible. Before UC, housing benefit automatically transferred to social landlords and a tiny sum for rent arrears could, too. Now, tenants like Prempeh have to jump through extra hoops before they can set up the same arrangement. And intensive support from staff like Vandi won’t be possible once UC expands to hundreds of thousands of new claimants.

Citizens Advice staff and housing providers agree that the initial payment delay has emerged as the major stumbling block in UC’s implementation. Withholding payment for at least five weeks rests on a faulty assumption that claimants have last month’s money in the bank. But benefit claimants lived on money coming in weekly and fortnightly, and only half of low-income workers in Britain receive earnings monthly.

Stunned by the figures on rent arrears, Fletcher and her team at the NFA are pushing for a policy change that expedites that first UC payment to protect tenants from long-term debt and landlords from a loss of income.

A spokesman for the DWP challenges the research findings and says there is no evidence of systemic delays in payments. “For anyone who is having difficulties, we provide budgeting help and benefit advances, as well as stronger support for vulnerable people,” he says. “And under universal credit, claimants are more likely to move into work and earn more.”


In Tameside, Clarke wonders how any parent can withstand even the standard wait for UC. “It nearly broke me,” she says. “Who can ask a mother to go without income for seven weeks when her child needs clothes and food?” Clarke can finally afford the bare necessities. But paying off her debt to her landlord, the council, and the friends and relatives who helped her with Christmas has only just begun.




We Support a Judicial Review of Clause 24

Brentwood Lettings is very proud to support a new campaign against the unfair and unjust Clause 24.

Steve Bolton and Chris Cooper are co-leading a legal challenge against the Conservative Government via a process known as a “Judicial Review”.

Judicial Review of Clause 24 (Alice in Wonderland Tax Grab) is aimed at disallowing the perfectly legitimate finance costs (including mortgage interest), of individuals who own and operate buy to let properties in their own name but excludes the same for institutions, corporations, wealthy cash buyers and overseas landlords.

If you would like to lend your support to this campaign please visit:


clause 24


This Clause 

The Government wishes to continue to tax not just the rental ‘profits’, but will now not allow individual investors to offset the main cost of arriving at that taxable profit, namely the mortgage finance costs.

If you would like to lend your support to this campaign please visit:



What’s at stake?

EVERY single business in the UK is allowed to offset their total costs against their income before being taxed (on their profit). The Summer Budget changes this very fundamental and important business principle.

However, it only does so in a way that just discriminates against individual buy to let business owner-operators, who have mortgages/finance costs.

As a result of this change, many thousands of people will find themselves being taxed on loss-making buy-to-let properties, see massive increases in the percentage of tax payable and many will find that they will be pushed upwards into a higher tax bracket, even though they may well not be making a single penny of extra profit!

We want to bring back a level playing field in the private rented sector to challenge the advantage the government is giving to institutional and corporate investors, overseas property buyers and cash-purchasing landlords, none of whom are affected by Clause 24.

In the words of Philip Booth, a Professor of Finance, Public Policy and Ethics at St. Mary’s University:

“To put it quite bluntly, this is an elementary undergraduate public finance error that should not be made in the Treasury.”

A member of ICAEW commented;

“It is a long established principle of taxation that expenses incurred wholly and exclusively for the purposes of the business are deductible when calculating the taxable profits. Clause 24 of the Summer 2015 Finance Bill contravenes that principle and will result in proprietors of property businesses being liable to tax on a fictitious profit – even if the proprietors really make a loss.

The tax change does not just affect new borrowings. Landlords with existing borrowings will be affected. Portfolio landlords will be particularly badly hit.

As a consequence of the tax change, major changes in the private sector will take place. Some landlords will pass on their increased tax by increasing rents. Others will be forced to sell, as they will not be in a position to pay the extra tax demanded by HMRC. Homelessness will increase as some tenants will not be able to afford higher rents and many will be evicted by landlords forced to sell”.

Steve Bolton, who is spear-heading the legal fight on behalf of his 250 strong network of PPP landlords and thousands of other investors, commented:

“It’s not clear why the Government has chosen to just launch an attack on buy-to-let owner-operators with mortgages. It’s a tax from Alice in Wonderland – truly absurd and divorced from real life. Not only is this tax grab unfair, undemocratic and underhanded, but we believe that it could also be unlawful.”

The lawyers supporting Steve Bolton and other interested parties believe that there may be a basis in Human Rights and European law where this can be challenged and over-turned via the courts.

If you would like to lend your support to this campaign please visit:



What’s the next step:


The campaign is seeking a “judicial review”, which is a type of court proceeding where a judge reviews the lawfulness of a decision or action taken by a public body (in this case the Conservative Government).

Specifically we are challenging Clause 24 of the Finance Bill 2015, which we believe unlawfully breaches human rights and/or European Union law.


What are the steps and likely timings for a judicial review action?

Screenshot 2015-12-27 14.53.51

Raising £50,000 of funding – as soon as possible

A “pre-action protocol letter” setting out our case to be sent to the Government in January 2016 (latest);

An application for judicial review to be filed with the court in February 2016;

The Government then has 21 days to respond to the application by filing a defence;
If permission is granted, a 1-3 day hearing would then be scheduled by the court and a decision would be made

If you would like to lend your support to this campaign please visit:



The legal team:


Mrs Cherie Blair CBE, QC and Sarah Hannett Omnia Strategy LLP.



If you would like to lend your support to this campaign please visit:


Individuals affected by Clause 24 if it results in landlords leaving or not investing further in the private rented sector:

Lettings agents
BTL lenders
Mortgage brokers
Insurance providers
EPC providers
Suppliers of products and services to the lettings sector – including digital products such as property management software.
Furniture providers (HMOs)


If you would like to lend your support to this campaign please visit:



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