Funding a Section 24 Tax Bill Without Remortgaging
A landlord can cover a Section 24 tax bill by selling a portion of future rent rather than remortgaging. Factored advances £1,000 to £75,000 within 24 hours against up to 12 months of contracted rent, leaving the existing buy-to-let mortgage, fixed rate and lender arrangements completely untouched.
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Why Section 24 creates a cashflow gap
Section 24 of the Finance (No. 2) Act 2015 removed the ability of individual landlords to deduct mortgage interest from rental income. Since April 2020, finance costs attract a 20% tax credit instead, so the taxable figure is gross rent rather than profit after interest.
The practical effect is that a landlord's January self assessment bill can be several thousand pounds higher than the cash left in the account, particularly for higher rate taxpayers with interest-only buy-to-let mortgages.
- Tax is assessed on gross rental income, not on profit after mortgage interest.
- Higher rate taxpayers feel the largest gap between paper profit and cash in hand.
- Payments on account fall due on 31 January and 31 July each year.
How a rent advance covers the bill
Factored purchases an agreed portion of the landlord's contracted future rent and pays a lump sum upfront. The landlord uses that lump sum to settle the HMRC bill on time, and the arrangement is settled from rent already due.
Because no charge is registered against the property, a landlord part-way through a fixed rate avoids early repayment charges and avoids re-entering the mortgage market at current rates.
- Apply with a signed tenancy agreement and proof of ownership.
- Funds arrive within 24 hours of approval, ahead of the 31 January deadline.
- No lender consent, no valuation and no legal fees.
Why landlords avoid remortgaging for a tax bill
- A remortgage takes four to twelve weeks, which rarely fits a tax deadline.
- Leaving a fixed rate early can trigger an early repayment charge of 1% to 5%.
- Rates on a new product may be materially higher than the existing rate.
- Valuation and legal fees add cost to a bill that is already unwelcome.
- Rental income is a reliable source of tax funding for landlords with occupied tenancies.
Ways to fund a Section 24 tax bill compared
| Factor | Factored rent advance | Remortgage | HMRC time to pay |
|---|---|---|---|
| Speed | 24 hours | 4 to 12 weeks | Days to weeks |
| Fees | One agreed fee | Legal, valuation and product fees | Late payment interest applies |
| Security | No charge on the property | First charge on the property | None |
| Credit impact | Soft search only | Hard credit search | Recorded with HMRC |
| Effect on mortgage | Existing mortgage unchanged | Replaces existing mortgage and rate | No effect |
| Amount available | £1,000 to £75,000 | Limited by equity and stress tests | Agreed instalments only |
When a rent advance may not suit you
- A rent advance is sized on contracted rental income, so it is not the right route for sums far larger than the rent a property produces. Purchases and large developments are usually better served by a mortgage or a bridging facility.
- Because settlement comes out of rent already being collected, landlords who need that full rent for monthly mortgage payments should check the reduced income still covers their outgoings before applying.
- A property with no tenancy in place, or with rent not being paid, will not qualify — the advance is priced against rent that is contracted and flowing.
- Where a landlord wants the cheapest possible cost of capital over several years and can wait weeks for funds, refinancing at a low rate may be less expensive than a short-term advance.
Sources and official guidance
- FCA Financial Services Register — check a firm's registration
- Companies House — Factored Technologies Limited (14649122)
- GOV.UK — Tax relief for residential landlords: how it's worked out
- legislation.gov.uk — Finance (No. 2) Act 2015, Section 24
- HM Land Registry — Practice guide 29: registration of legal charges
Frequently asked questions
Can a landlord use a rent advance to pay HMRC?
Yes. A Factored rent advance is unrestricted, so UK landlords regularly use the funds to settle self assessment tax bills, payments on account and corporation tax.
Will taking a rent advance affect a fixed rate mortgage?
No. Factored registers no charge at HM Land Registry, so an existing fixed rate buy-to-let mortgage, its rate and the lender arrangements are unaffected and no early repayment charge arises.
How quickly can funds arrive before the 31 January deadline?
Factored transfers funds within 24 hours of approval, so a landlord applying in the final week of January can still settle the bill on time.
Does a rent advance reduce a Section 24 tax liability?
No. A rent advance solves the timing of the payment rather than the liability itself. Landlords should take advice from an accountant on the tax treatment of the arrangement.
How much can be raised against rental income?
Factored advances between £1,000 and £75,000, based on up to 12 months of contracted rent across one or more tenancies.
Related Factored guides
Get a rent advance of £1,000 to £75,000
Factored funds UK landlords within 24 hours, with no legal fees, no valuation and no charge on the property.