What it looks like here: ISAs, pension tax relief, stamp duty, Section 24

The wrappers the book does not have

The book's four categories of income-producing thing are about what you own: let property, paper assets such as shares and funds, a business that runs without you, and something that pays royalties. That is the American shape of the question. In Britain there is a question in front of it, and it has a number attached.

The question is what you hold the thing inside. A wrapper is not an investment. It is the container that decides how what is inside gets taxed, and two of them do work that nothing in the book does.

The first is the ISA. For the 2026 to 2027 tax year the maximum you can save in ISAs is £20,000, and gov.uk lists four types: cash, stocks and shares, innovative finance, and the Lifetime ISA. The Lifetime ISA has its own £4,000 cap that counts towards the same £20,000, and it has to be opened before you turn 40. Nothing about the wrapper changes what is inside it. A stocks and shares ISA can lose money, and an innovative finance ISA holds the riskiest things on the list.

The second is pension tax relief, and it is the part of British arithmetic the book has no equivalent for. Relief runs on contributions worth up to 100% of your annual earnings. Under relief at source it is added automatically at the basic 20% rate, which means £80 of take-home pay arrives in the pot as £100 before anything has been invested, grown or chosen. If you have no earnings at all in a year you can still put in £2,880 and have it treated as £3,600.

Above the basic rate there is more, and it does not arrive by itself. In England, Wales and Northern Ireland a higher-rate taxpayer claims an extra 20% on income taxed at 40%, and an additional-rate taxpayer an extra 25% on income taxed at 45%, through Self Assessment. Scotland runs its own set, an extra 1%, 22%, 25% and 28% against income taxed at 21%, 42%, 45% and 48%. There is a ceiling on all of it: the annual allowance is £60,000, tapered where threshold income is over £200,000 and adjusted income is over £260,000.

Two honest edges before this reads as a free lunch. Relief is relief. It is not a gift: pension income is taxable when you draw it, and you cannot reach the money before the minimum age. And none of the above says which wrapper anyone should use, or in what order, because that depends on facts about you that a course cannot see.

What it does establish is the shape of the British question. The book asks what to own. Here, the first sum is what to own it inside, and unlike almost everything else in personal finance, that sum has a known answer on day one rather than a forecast.

What it costs to buy the second one

Now the book's signature move: buy property that pays rent. In England and Northern Ireland the bill starts before any rent does.

The rule, in HMRC's own words, is that you must pay the higher Stamp Duty Land Tax rates when you buy a residential property, or part of one, for £40,000 or more and it means you will own more than one. The higher rates in force from 1 April 2025 are 5% up to £125,000, 7% on the slice to £250,000, 10% to £925,000, 15% to £1.5m, and 17% above that. Set those against the standard residential bands (nil to £125,000, then 2%, 5%, 10% and 12%) and the pattern is plain. It is the ordinary table with five percentage points added to every band, including the band that is otherwise nil.

Work one through. A £250,000 buy-to-let, bought by someone who already owns a home. On the standard bands there would be nothing on the first £125,000 and 2% on the next £125,000: £2,500. At the higher rates it is 5% of £125,000 plus 7% of £125,000. That is £6,250 plus £8,750, so £15,000.

Look at what that figure is. It is due on completion, in cash, and no lender advances it against the property. Suppose the place lets for £1,000 a month. The purchase tax alone is fifteen months of gross rent, before the mortgage, before any running cost, and before a single void week. The book's arithmetic starts at the rent. The British version starts fifteen months behind it.

Three details that change the answer and are usually got wrong. The surcharge was three percentage points until 31 October 2024, when the Autumn Budget raised it to five with the stated aim of discouraging second homes and buy-to-let purchases — so any calculation copied from an article older than that is two points light. A buyer who is not UK resident pays a further 2% on top. And if you sell or give away your previous main home within three years of buying the new one, you can apply for a refund of the higher-rate part: a refund you claim. Nothing applies itself.

Then the boundary. All of the above is England and Northern Ireland. Scotland charges Land and Buildings Transaction Tax and Wales charges Land Transaction Tax, each with its own rates and its own surcharge, and this course does not carry those figures. Any sentence that opens "in the UK, stamp duty on a second property is" is wrong before it reaches the verb.

Section 24, and the sum the book cannot do

The purchase tax is a one-off. The change in this section is the one that runs every year, and it is the reason the book's rental arithmetic no longer lands in Britain.

It goes by the name Section 24 in the property press. HMRC describes it plainly: the tax relief that landlords of residential properties get for finance costs is restricted to the basic rate of income tax. Mortgage interest used to come off rental income as an ordinary expense. It does not any more. Instead the deduction is withdrawn and replaced with a basic-rate tax reduction, worked out on the lower of three figures (the finance costs, the profits of the property business, and adjusted total income) with anything unrelieved carried forward.

The change was phased in over four years: 75% of finance costs still deductible in 2017-18, 50% in 2018-19, 25% in 2019-20, and nought from 2020-21 onwards, with the whole of the relief given as a tax reduction from that year. It has been fully in force since the 2020 to 2021 tax year, which is thirteen years after the book was printed and six years before you are reading this.

Here is what it does to a set of numbers. Rent of £12,000 a year, mortgage interest of £6,000, other allowable costs of £2,000, and a landlord paying tax at 40% under the England, Wales and Northern Ireland rates.

Before the restriction, the interest came off the top. Taxable profit was £12,000 less £6,000 less £2,000, so £4,000, and 40% of that is £1,600 of tax.

Under the current rules the interest stays in. Taxable profit is £12,000 less £2,000, so £10,000, and 40% of that is £4,000. Against that sits the tax reduction: the basic rate applied to the £6,000 of interest, which is £1,200. Tax due, £2,800.

£1,200 more, on identical rent and identical costs. That figure is not arbitrary. It is the twenty points between the rate this landlord pays and the rate the relief is given at, applied to the interest bill — which is the whole of what the restriction does.

Two things follow that are easy to miss. First, the number that now goes on the return is £10,000 rather than £4,000, and a bigger taxable figure can carry total income across a band boundary the old figure sat below. Second, a landlord whose income stays inside the basic-rate band gets the same answer either way, because relieving £6,000 at 20% and reducing the tax by 20% of £6,000 are the same sum. It is the landlord whose profit figure crosses a boundary, and the one already above it, who finds the arithmetic has moved.

Note the limits of what has just been said, because this is where a course like this over-reaches. The HMRC guidance behind it addresses individual landlords of residential property. It does not set out the treatment of companies, and nothing here should be read as suggesting one structure over another. Rates differ in Scotland, so the worked example is an England, Wales and Northern Ireland one. And none of this makes letting property a good or a bad idea. It makes the book's version of the sum an American one, which is a different and more useful claim.