Landlord tax · Section 24 guide · Updated May 2026
Section 24 explained: mortgage interest restriction for UK landlords.
Written by Iftikhar Rashid FCCA — Managing Partner, RR Accountants. 16 years in practice, specialist in property and landlord tax.
What is Section 24?
Section 24 of the Finance (No. 2) Act 2015 restricts mortgage interest tax relief for individual landlords in the UK. Since April 2020, landlords can no longer deduct mortgage interest from rental income to reduce their tax bill. Instead, they receive a flat 20% tax credit on finance costs. Higher-rate taxpayers previously received 40% relief and now receive 20% — costing £5,000–£30,000+ in additional annual tax for larger portfolios. Limited companies (SPVs) are not affected. [VERIFY: gov.uk]
Who this applies to: Individual UK landlords with mortgaged residential properties held in personal name.
Why it matters: A higher-rate landlord with a £500,000 mortgage at 5% can pay £5,000+ more tax per year than under the old rules — permanently, not as a one-off.
How Section 24 changed the rules
✕ Before Section 24 (pre-2017)
- •Mortgage interest deducted from rental income
- •Tax calculated on reduced profit
- •Higher-rate taxpayer: 40% relief on every £1 of interest
- •Additional-rate taxpayer: 45% relief
- •Basic-rate taxpayer: 20% relief
✓ After Section 24 (April 2020 onwards)
- •Mortgage interest NOT deducted from rental income
- •Tax calculated on full rental profit
- •All landlords: flat 20% tax credit on interest paid
- •Higher-rate taxpayer: effectively 20% relief (lost 20%)
- •Additional-rate taxpayer: effectively 20% relief (lost 25%)
Who does Section 24 apply to?
Affected by Section 24
- ✕Individual landlords with mortgaged residential properties
- ✕Personally-held buy-to-let portfolios
- ✕Higher-rate taxpayers (feel the impact most)
- ✕Basic-rate taxpayers pushed into a higher band by rental profit
- ✕Joint ownership partnerships between individuals
Not affected
- ✓Limited companies (SPVs) — interest fully deductible
- ✓Commercial property landlords
- ✓Properties with no mortgage
- ✓Student landlords below the income tax threshold [VERIFY]
How much does Section 24 cost?
Illustrative example only. [VERIFY: current income tax rates and bands at gov.uk/income-tax-rates]
| Scenario | Annual interest | Old relief | New credit | Extra tax/year |
|---|---|---|---|---|
| Higher-rate landlord, £200k mortgage @ 5% | £10,000 | £4,000 (40%) | £2,000 (20%) | ~£2,000/yr |
| Higher-rate landlord, £500k mortgage @ 5% | £25,000 | £10,000 (40%) | £5,000 (20%) | ~£5,000/yr |
| Higher-rate landlord, £1m portfolio @ 5% | £50,000 | £20,000 (40%) | £10,000 (20%) | ~£10,000/yr |
| Basic-rate landlord (no band push) | £10,000 | £2,000 (20%) | £2,000 (20%) | £0 (if no band push) |
These are illustrative figures. Your actual position depends on your total income, tax band, and portfolio structure. [VERIFY all figures]
What can landlords do about Section 24?
Reduce mortgage borrowing
Paying down capital reduces annual interest, lowering the Section 24 impact. Effective but requires available capital.
Risk: Opportunity cost of capital deployed elsewhere.
Review property-by-property yield
Properties with low yield and high mortgage interest are disproportionately hit. Selling one poorly-performing property can materially improve overall position.
Risk: CGT on disposal. Timing matters.
Pension contributions
Pension contributions can reduce your adjusted net income, potentially keeping you in the basic-rate band where Section 24 has less impact. [VERIFY: current pension annual allowance at gov.uk]
Risk: Liquidity tied up until pension access age.
Incorporate new acquisitions into an SPV
Limited companies can deduct mortgage interest in full. Buying future properties through an SPV avoids Section 24 on new debt — while leaving existing personal-name properties where they are.
Risk: SPV adds admin, corporation tax, and extraction planning complexity.
Transfer existing properties to an SPV
Transferring existing personally-held properties into a limited company is possible but triggers SDLT at full market value and potentially CGT. For most landlords with significant unrealised gains, the transfer costs exceed the Section 24 saving. We model this before recommending it.
Risk: SDLT + CGT on transfer can be five-to-six figures. This decision is often irreversible.
This guide explains the rules and mechanisms. It is not personalised tax advice. Your position depends on your full income picture, portfolio structure, borrowing, and exit plans. Speak to a specialist before making structural decisions.
Section 24 — frequently asked questions
What is Section 24?
Section 24 of the Finance (No. 2) Act 2015 restricts the mortgage interest tax relief available to individual landlords. Before Section 24, landlords could deduct all mortgage interest from rental income before calculating tax. Since April 2020, mortgage interest is no longer deductible — instead, landlords receive a 20% basic-rate tax credit on finance costs. This affects basic-rate, higher-rate, and additional-rate taxpayers differently. [VERIFY: gov.uk/guidance/restricting-finance-cost-relief-for-individual-landlords]
Who does Section 24 affect?
Section 24 affects individual landlords who let residential property in their personal name and have a mortgage on those properties. It does not affect landlords who own through a limited company (SPV), commercial property landlords, or furnished holiday let operators (FHLs). Higher-rate and additional-rate taxpayers feel the impact most sharply — they previously received 40–45% relief on mortgage interest and now receive only 20%.
How much extra tax does Section 24 cost?
For a higher-rate landlord with £200,000 of outstanding mortgage and a 5% interest rate, the annual mortgage interest is approximately £10,000. Under Section 24 they receive a £2,000 tax credit (20% of £10,000) instead of a £4,000 deduction (40%). The additional annual tax cost is approximately £2,000 per year at current rates — rising significantly for larger portfolios. All figures are illustrative. [VERIFY: current income tax rates at gov.uk/income-tax-rates]
Does Section 24 apply to limited companies?
No. Section 24 only applies to individuals letting property in their personal name. Limited companies (including SPVs set up specifically for property) can still deduct mortgage interest in full as a business expense before calculating corporation tax. This is one of the main reasons landlords consider incorporating — but the transfer itself triggers SDLT and potentially CGT.
How does Section 24 work in practice?
Under Section 24: (1) calculate rental profit without deducting mortgage interest; (2) add this profit to all your other income to find your marginal tax rate; (3) calculate 20% of the total mortgage interest paid; (4) deduct that 20% credit from your final tax bill. The credit cannot create a tax refund. Because interest no longer reduces profit, it can push a landlord's taxable income into a higher band than their actual cash position.
What is the difference between Section 24 and the old mortgage interest deduction?
Before Section 24 (pre-2017): landlords deducted mortgage interest from rental income before tax, so a higher-rate taxpayer got 40% relief. Under Section 24 (fully in force since April 2020): interest is added back, profit is taxed in full, then a flat 20% tax credit is applied. Higher-rate taxpayers now get 20% relief instead of 40% — a 50% reduction in interest relief. Additional-rate taxpayers go from 45% to 20%.
Should I incorporate to avoid Section 24?
Incorporation can help — limited companies can deduct mortgage interest in full. But transferring existing personal-name properties into a company triggers Stamp Duty Land Tax (at full market value) and potentially Capital Gains Tax on the disposal. This can cost more than the Section 24 saving, especially for long-held properties with large capital gains. We model the full picture before recommending any transfer. This is not personalised tax advice.
Are furnished holiday lets affected by Section 24?
Furnished holiday lets (FHLs) had different tax treatment — they were classed as a trade, so mortgage interest was fully deductible. However, the furnished holiday let regime was abolished from April 2025. Properties previously in the FHL regime are now treated as ordinary property letting for tax purposes, including being subject to Section 24. [VERIFY: current FHL rules at gov.uk]
Related guides and services
- Accountants for UK landlords
- MTD for landlords — complete guide
- SPV vs personal name — should you incorporate?
- Capital Gains Tax on property disposal
- Company formation — SPV setup
- Self Assessment for landlords
Section 24 planning
Want to understand what Section 24 is costing your portfolio specifically?
We model your exact position — income, mortgage interest, portfolio structure, marginal rate — and show you the numbers before recommending any changes.
Book a call →Iftikhar Rashid FCCA · 16 years · Specialist in property and landlord tax