Section 24 & Tax Relief

Form 17 is worth filing when the income-shift between spouses crosses a tax-band boundary, but the saving is bounded by the lower-rate spouse's remaining basic-rate band, and the calculation has to thread the Section 24 finance-cost restriction and the Making Tax Digital threshold to be done properly. This page walks the decision-framework math for a typical higher-rate / basic-rate landlord couple (the Hollis household), shows where the saving caps out, and sets out the cases where Form 17 does and does not pay.

This is the practical claim guide for individual UK landlords, not the policy explainer. It covers exactly which SA105 box to use, what costs qualify as residential finance costs, the three-way cap on the 20% basic-rate credit (lower of finance costs, property profits, or adjusted total income above the personal allowance), the carry-forward mechanism when the cap bites, and worked examples for three landlord profiles. The comprehensive policy and history of Section 24 is in our Section 24 complete guide, linked throughout.

The Furnished Holiday Lettings tax regime was abolished from 6 April 2025 (1 April 2025 for Corporation Tax) under Finance (No. 2) Act 2024. Holiday let income is now taxed like ordinary property income, with Section 24 finance cost restrictions, no new capital allowances, and standard residential CGT rates on disposal. This guide explains the transitional rules, the SDLT position (the additional dwellings surcharge rose from 3% to 5% on 31 October 2024), and the practical steps former FHL landlords should take.

Most landlord insurance premiums are deductible against rental income where the cover is wholly and exclusively for the letting business. Insurance payouts are not automatically tax-free: rent guarantee receipts and reimbursements of revenue repairs are taxable, while genuine capital insurance receipts feed the CGT computation. HMRC sets the recoveries treatment out at PIM2110. This guide covers premiums and payouts with worked examples, the SA105 box, and MTD recording.

The Rent a Room Scheme lets owner-occupiers earn up to £7,500 a year tax free from a furnished room in their main home. The £7,500 figure has been frozen since 6 April 2016 and is unchanged for 2026/27. This guide covers eligibility, the £3,750 joint-owner split most lodger pages get wrong, the opt-out deadline, why losses cannot be claimed under the scheme, and how lodger income interacts with an existing buy-to-let portfolio under Section 24 and MTD for Income Tax.

Once you have claimed the Annual Investment Allowance, selling the asset (or the property carrying its fixtures) can trigger a balancing charge. This guide covers the disposal-value rules under CAA 2001 s.61, the s.196 fixtures Table, balancing charge versus balancing allowance, and the step-by-step process for making and defending an AIA claim, including hire purchase, short accounting periods and partnership allocation.

A year-anchored review of the Annual Investment Allowance for 2024/25: the £1 million permanent cap, who could claim it, how it sat with the abolition of the furnished holiday lettings regime, what has changed since (the writing-down allowance cut to 14% from April 2026 and the new 40% first-year allowance from 1 January 2026), and how to amend a 2024/25 return in time.

For an ordinary residential let, the annual investment allowance on plant inside the dwelling is blocked by CAA 2001 s.35. Here is the dwelling-house bar, the three situations where you genuinely can claim, the relief you use instead, and how the £1 million cap and the 2026 first-year allowance changes work.

The Annual Investment Allowance (AIA) gives a 100% deduction on qualifying plant and machinery, up to a permanent £1 million each year under CAA 2001 section 51A(5). This guide explains the permanent cap, what plant and machinery actually qualifies for a property business, the dwelling-house restriction that blocks most standard buy-to-let claims, how the single allowance is shared across a company group, and how to claim.

Annual Investment Allowance (AIA) gives 100% tax relief on qualifying plant and machinery up to £1 million a year. This guide explains what AIA is, how it works, and why the dwelling-house rule means most ordinary buy-to-let landlords cannot claim it at all.

Writing down allowance (WDA) lets you deduct the cost of a business car against your property profits over time. The main pool rate falls from 18% to 14% from April 2026 (CAA 2001 s.56, as amended by Finance Act 2026), the special rate pool stays at 6%, and only new and unused zero-emission (0g/km) cars qualify for the 100% first-year allowance under CAA 2001 s.45D. This guide explains which pool your car sits in, how the reducing-balance calculation works, the April 2026 rate change, electric-car treatment, and how WDA interacts with Section 24 and Making Tax Digital.

The separate property income tax rates of 22% basic, 42% higher and 47% additional from 6 April 2027 are now enacted, in Finance Act 2026 c.11 section 7 (Royal Assent 18 March 2026), for England and Northern Ireland. Finance Act 2026 Schedule 1 also lifts the Section 24 finance-cost credit to the new 22% property basic rate, so it rises in step with the rates. A basic-rate landlord therefore sees no new wedge; a higher-rate landlord's gap between the 42% rate and the 22% credit stays at 20 percentage points, the same as 2026/27. The real 2027 cost is the flat 2 percentage point rate rise on net rental profit. This page walks through the position by landlord profile with worked examples, then sets out the planning responses available before commencement.

Section 24 taxes your gross rental income rather than your real profit, so the figure that decides your tax band is inflated. That can tip a basic-rate landlord into higher rate (and trigger the personal allowance taper) even when your actual cash is barely positive. This guide shows exactly how, with a worked example, the April 2027 rate change, and the practical ways to manage it.

Section 24 does not stop residential landlords claiming finance costs. It changes how the relief is given: instead of deducting mortgage interest and other dwelling-related loan costs from rental profit, you get a basic-rate tax reducer worth 20% of those costs for 2026/27 (rising to 22% from 2027/28). This guide sets out exactly which costs qualify as residential finance costs, which fall outside the restriction, how the three-part cap works, where the figures go on the SA105 self-assessment pages, and a full worked example.

Section 24 stops individual landlords deducting mortgage interest from rental profit and instead gives a basic-rate tax reducer: 20% of finance costs for 2026/27, rising to 22% from 6 April 2027 in England, Wales and Northern Ireland. The credit is capped at the lower of three figures (20% of finance costs, 20% of property profit before finance costs, and 20% of income above the personal allowance), and any restricted amount carries forward. This guide works the calculation by hand for higher-rate, basic-rate, loss, multiple-property and 2027/28 cases, shows where the cap actually bites, and explains why the April 2027 change opens no new wedge for basic-rate landlords.

Mortgage arrangement and broker fees on a residential let are finance costs, not capital costs. For individual landlords they get basic-rate (20%) relief under Section 24; companies deduct them in full. The purchase-versus-remortgage distinction most guides repeat is wrong.

UK individual landlords cannot deduct mortgage interest from rental profit since Section 24 took full effect in April 2020. They receive a basic-rate tax credit instead (20%, rising to 22% from 6 April 2027 under the Finance Act 2026). Limited companies still deduct interest in full. This guide answers the yes/no question by owner type and signposts the detailed claim and policy guides.

Replacement of Domestic Items Relief lets UK landlords deduct the cost of replacing furniture, appliances, furnishings and kitchenware in a let residential dwelling. It is governed by ITTOIA 2005 s.311A for individuals and CTA 2009 s.250A for companies, and it replaced the 10% wear and tear allowance from April 2016. This guide covers the four statutory conditions, the like-for-like cap, the incidental-cost uplift most landlords miss, the furnished holiday let exclusion, the company route, and how the relief interacts with Section 24.

A decision-and-timing playbook for UK landlords ahead of 6 April 2027, when property income is taxed at 22%, 42% and 47% in England, Wales and Northern Ireland (Scotland excluded) under Finance Act 2026, and the Section 24 finance-cost reducer rises to 22% in step so no new basic-rate wedge opens. Rather than re-explaining the rates, this page sets out what to do before 6 April 2027 and in what order, keyed by portfolio size: timing disposals (capital gains tax rates are unchanged), deferring discretionary repairs into 2027/28 to relieve them at the higher rate, shifting income to a lower-rate spouse via Form 17, using pension contributions to manage which band your profit falls in, modelling incorporation and allowing for the lead time and the new requirement to claim section 162 relief, and getting cash reserves and Making Tax Digital readiness in place.

Section 24 continues into 2027/28 and, from 6 April 2027, property income is taxed at separate rates of 22%, 42% and 47%. This explainer sets out exactly what changes, what stays the same, the dates that matter, who is affected, and where to go next when you are ready to plan your moves.

Section 24 forces landlords to add gross rental income to their adjusted net income, which can push them past the £60,000 High Income Child Benefit Charge threshold even when their bank balance has not changed. Here is how the trap works in 2026/27 and how to plan around it.

Section 24 restricts mortgage interest relief on residential lettings to a basic-rate tax reducer rather than a deduction, and PAYE landlords feel it acutely because employment income already fills the basic-rate band before any rental profit is counted. Your gross rents (before mortgage interest) are stacked on top of your salary, so rental income tips you into the 40% band, the £100,000 personal allowance taper, or the High Income Child Benefit Charge faster than the rental figures alone suggest. This page sets out exactly how salary plus rental income is taxed, shows the gross-up effect with a worked example, compares a PAYE landlord against an identical rental-only landlord, and works through the mitigation that still applies (pension contributions, spousal income splitting, incorporation). It also explains how the enacted April 2027 separate property income rates and Making Tax Digital change the picture, and corrects the common myth that a new tax wedge opens in 2027/28.

From 6 April 2027 property income sits in its own 22/42/47 schedule, so higher-rate landlords pay 42% on property profit above £50,270. This is the higher-rate decision lens: how the band test works now that Section 24 adds interest back, the £50,270 cliff, the incorporation break-even against 19/25% corporation tax, disposal timing and income smoothing across the boundary, and why a £1,000 deduction is worth £420 to you. Finance Act 2026 (c.11 s.7) is enacted law.

Section 24 adds your full gross rent to taxable income before any mortgage interest relief, so the relief arrives only as a 20% credit. That mechanism can push basic-rate landlords across the higher rate threshold, into the 60% personal allowance trap, or into the additional rate, even when cash profit has not changed.

Section 24 applies the same way to interest-only and repayment mortgages: all the interest you pay is restricted to a basic-rate tax credit (20% for 2026/27, rising to 22% from 2027/28), never a deduction. Because an interest-only mortgage is all interest and never reduces the loan, your cash interest stays high for the life of the loan, which keeps the Section 24 restriction at its maximum every year. A repayment mortgage shrinks the interest over time as the balance falls. This guide works the numbers for a higher-rate landlord, explains where interest-only still makes sense, and sets out the realistic planning routes (incorporation, pension contributions, ownership splitting and MTD readiness) without pretending switching mortgage type is a Section 24 fix in itself.

When two people own a rental property, Section 24 restricts mortgage interest relief on each owner's share separately, so who reports what income matters. This guide covers the spouse 50/50 default, when Form 17 actually helps, the declaration of trust that must come first, the CGT angle on transferring a share, and what the April 2027 separate property rates change.

Section 24 restricts your mortgage interest to a flat 20% basic-rate tax credit across your whole residential portfolio. With several mortgaged buy-to-lets the restriction compounds: it inflates your taxable income, can push you into the higher-rate band, and reshapes the cash-flow and incorporation maths. This guide works through the cumulative impact with figures, then sets out the realistic responses.

Section 24 adds your mortgage interest back to taxable income and gives relief only as a basic-rate credit. For landlords whose income then crosses £100,000, the personal allowance tapers away and a 60% marginal rate opens up on £100,000 to £125,140. Here is exactly how the trap is built, a full worked example, the planning that defuses it (pension contributions, spousal income splitting, incorporation), and what changes in 2027 and under Making Tax Digital.

Remortgaging a buy-to-let does not change how Section 24 works: every pound of mortgage interest, on the original loan or on top-up borrowing, gets relief only as a basic-rate tax credit, never a deduction. What changes is the size of your interest bill, and whether the cash you release was actually used for the property. This guide covers refinancing, equity release, interest-only versus repayment, the 60% personal allowance trap, and what the 2027 property income rates do to the calculation.

Section 24 means mortgage interest no longer reduces your rental profit. You enter the full rent, claim other expenses as normal, put finance costs in the residential finance-costs box, and HMRC turns that into a 20% basic-rate tax credit. This guide walks the SA105 boxes line by line, with worked figures for basic-rate and higher-rate landlords.

Section 24 turned mortgage interest relief from a deduction off your rental income into a credit off your tax bill, fixed at the 20% basic rate for 2026/27. This guide explains the mechanics of that credit specifically: why a tax reducer is not the same as a deduction, how the 20% figure is computed and capped, why the reducer-versus-deduction switch is what halves a higher rate landlord's relief, and the enacted rise to a 22% reducer from 6 April 2027 in England, Wales and Northern Ireland.

A full step-by-step Section 24 calculation for a landlord with £50,000 rental income and £35,100 of mortgage interest, showing the real tax cost, the higher-rate trap that the rules create, the monthly cash flow squeeze, and the planning routes (incorporation, pension contributions, ownership splitting) that actually move the number.

If you borrow to buy a rental property you can no longer deduct the mortgage interest from your rental income. Instead you get a basic-rate tax credit, 20% for 2026/27 and 22% from 2027/28. This overview explains in plain English how the relief moved from a deduction to a credit, what it covers, why companies are treated differently, and where to read the detail on claiming it, on arrangement fees, and on the cap that can reduce it.

A step-by-step method to work out the tax on your rental income: net the right expenses, apply the Section 24 mortgage-interest add-back and 20% credit, stack the profit on your other income, and plan for the 2027/28 property-rate change and Making Tax Digital.

A Section 24 calculator turns the mortgage interest restriction into a single number: the extra tax you pay because finance costs no longer come off rental profit. This guide shows what figures to gather, how the basic-rate tax reducer and its three-part cap work, and reads the result for basic-rate, higher-rate and additional-rate landlords. It includes worked examples (including the landlord pushed into the higher-rate band and a £100k portfolio), the move to a 22% reducer and separate 22/42/47 property rates from 6 April 2027, MTD for Income Tax readiness, and the routes that genuinely reduce the cost: incorporation, spousal income splitting and pension contributions.

Section 24 replaced the old mortgage interest deduction with a 20% basic-rate tax reducer (rising to 22% from 6 April 2027), which pushes many landlords into higher tax bands on income they never actually keep. A personal pension contribution is the most direct legal lever a higher-rate landlord still controls: it gets full relief at the marginal rate, extends the basic-rate band, and can reinstate a tapered personal allowance. This guide shows exactly how the two interact, with worked figures, the £60,000 allowance and carry forward rules, the tapered allowance trap, the company route, and what changes when MTD for Income Tax and the new 2027 property rates arrive.

Section 24 restricts mortgage interest relief to a basic-rate tax credit, and it is fully in force with no repeal on any major party's agenda. Finance Act 2026 actually entrenched it further by lifting the credit from 20% to 22% in step with the new property income rates from April 2027. This guide gives a candid assessment of repeal odds, explains why the politics and the revenue make reversal unlikely, works a real example for a higher-rate landlord, and sets out the mitigation routes that work under the current rules rather than waiting for change that may never come.

Section 24 replaced full mortgage interest deduction with a basic-rate tax credit for individual landlords. This guide explains the three-way cap, who actually loses out, the real strategy options (and which ones are myths), how Section 24 interacts with the 60% allowance taper, what changes for the reducer from 2027/28, and how to model your own position.

Refinancing a buy-to-let can lower your rate or release equity for the next purchase, but Section 24 changes the after-tax picture and equity-release relief turns on what you do with the money. Here is how to test whether a remortgage genuinely pays.

The definitive guide to allowable landlord tax deductions in the UK for 2026/27. Covers every expense category, the grey areas most landlords miss (insurance-claim payouts, mortgage-fee timing, sub-£100 repairs, mixed-use vehicles), the home-office CGT trap, Replacement of Domestic Items Relief, Section 24, a full worked example, and Making Tax Digital readiness.

UK rental income is taxed on net profit at your marginal Income Tax rate (20%, 40% or 45% for 2026/27), with mortgage interest relieved as a 20% basic-rate credit under Section 24 rather than deducted. Making Tax Digital is live at £50,000 from 6 April 2026, and separate property income rates of 22%, 42% and 47% start on 6 April 2027.

Plenty of basic rate landlords assume Section 24 is a problem for higher earners only. It is not. Because the mortgage interest restriction adds your finance costs back to taxable income before the 20% credit is applied, it can tip you over the £50,270 higher rate threshold, trigger the High Income Child Benefit Charge, increase student loan repayments, and tie up cash you only recover later. This guide explains the mechanics, works through a real basic-rate example, sets out the 2027/28 change (the credit rises to 22% in step with the new property basic rate, so no new wedge opens), and lays out the practical responses, from pension contributions to incorporation.

A worked case study showing how the Section 24 finance-cost restriction lands on a higher-rate landlord with £100,000 rental income, the full 2026/27 tax calculation, what changes from April 2027, and how to read the incorporation decision.

Section 24 hits higher-rate taxpayers hardest because mortgage interest only earns a 20% tax credit, not relief at 40% or 45%. This guide shows the real cash cost with worked examples, the personal-allowance and tax-band traps it triggers, what the April 2027 separate property rates change (and what they do not), and the routes that genuinely reduce the burden.

What Section 24 is, in plain English: the rule (ITTOIA 2005 s.272A, from Finance (No. 2) Act 2015 s.24) that replaced full mortgage interest relief with a 20% basic-rate tax credit, the three-part cap on that credit, who it actually hits, the threshold knock-ons, and the enacted 22% reducer from April 2027 under Finance Act 2026.

Section 24 caps mortgage interest relief at 20% for individual landlords. Incorporation restores full relief but carries CGT, SDLT and refinancing costs. Here is how to tell which actually leaves you better off.