Section 24 Tax Guide
Understand how mortgage interest relief restrictions affect your buy-to-let tax bill and discover strategies to protect your rental income.
Estimate Your Section 24 Impact
Compare your tax liability under the old mortgage interest relief rules versus the current Section 24 restrictions to see how much extra tax you may owe.
Tax Impact Estimator
See the difference Section 24 makes to your annual tax bill.
How Section 24 Works
Understanding the tax calculation shift
Old Rules (Pre-2020)
Landlords could deduct 100% of their mortgage interest from rental income before calculating their tax liability, reducing their taxable profit.
New Rules (Section 24)
Mortgage interest is no longer an allowable expense. Taxable profit is calculated as Rental Income minus only non-finance allowable expenses.
The 20% Tax Credit
To partially offset this, landlords receive a tax reduction equal to 20% of their mortgage interest payments, applied after the tax is calculated.
The Higher Rate Trap
Because your taxable profit is artificially higher, basic-rate taxpayers may be pushed into the 40% or 45% tax bands, significantly increasing their bill.
Allowable vs Non-Allowable Expenses
A general overview of what you can and cannot deduct from your rental income under current HMRC rules.
| Expense Type | Deductible from Rental Income? | Notes |
|---|---|---|
| Mortgage Interest / Finance Costs | No | Replaced by a 20% basic rate tax reduction |
| Letting Agent Fees | Yes | Fully allowable as a revenue expense |
| Repairs and Maintenance | Yes | Must be “like-for-like” repairs, not improvements |
| Building Insurance | Yes | Fully allowable |
| Capital Improvements (e.g., new kitchen) | No | Considered capital expenditure; may reduce Capital Gains Tax later |
| Mortgage Capital Repayments | No | Never tax-deductible under any rules |
Section 24 FAQ
Answers to the most frequently asked questions about UK landlord tax rules and mortgage interest relief restrictions.
Section 24 of the Finance (No. 2) Act 2015 restricts the amount of mortgage interest that individual landlords can deduct from their rental income for tax purposes. Instead of deducting interest as an expense, landlords receive a basic rate (20%) tax reduction on their mortgage interest payments.
Section 24 affects individual landlords who own buy-to-let properties in the UK. It does not apply to properties held within a limited company, nor does it apply to Furnished Holiday Lettings (FHLs) or commercial property landlords.
No. Under the fully implemented Section 24 rules, you cannot deduct any mortgage interest or finance costs from your rental income to calculate your taxable profit. Instead, you calculate tax on the full rental income (minus other allowable expenses) and then claim a 20% tax credit on the mortgage interest.
Common strategies include transferring the property portfolio into a limited company (where corporate tax rules still allow full interest deduction), paying down the mortgage to reduce interest costs, or adjusting rental prices to cover the increased tax liability. Always consult a qualified tax advisor before making structural changes.