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Section 24 & Tax Relief

Navigate Section 24 mortgage interest restrictions with confidence. Comprehensive guides on tax relief changes, calculators, planning strategies, furnished holiday lets, and self-assessment for landlords.

Understanding Section 24 Mortgage Interest Restrictions

Section 24 of the Finance (No. 2) Act 2015 fundamentally changed how individual landlords claim tax relief on mortgage interest. Since April 2020, individual landlords can no longer deduct mortgage interest from rental income before calculating tax. Instead, they receive a basic-rate (20%) tax credit on the interest paid.

This means the full rental income is taxed at your marginal rate, with only a 20% credit applied afterwards. For basic-rate taxpayers the effect is neutral, but higher-rate and additional-rate taxpayers face a significantly increased tax bill.

Impact on Higher-Rate Taxpayers

Higher-rate taxpayers at 40% only receive a 20% tax credit, effectively doubling the cost of mortgage interest. Additional-rate taxpayers at 45% fare even worse. Section 24 can also push basic-rate taxpayers into the higher-rate band because gross rental income — without the mortgage deduction — inflates total taxable income.

This knock-on effect can reduce eligibility for child benefit, erode the personal savings allowance, and remove access to marriage allowance — making the real cost of Section 24 far greater than the headline figures suggest.

Calculating Your Section 24 Liability

To calculate your Section 24 position, start with gross rental income and deduct all allowable expenses except finance costs. Apply income tax at your marginal rate to the resulting profit. Then calculate 20% of your total finance costs and deduct this as a tax credit. The difference between these two figures represents your additional tax burden under Section 24.

Landlords with multiple properties should aggregate all rental income and finance costs across their portfolio before performing this calculation, as HMRC treats UK property income as a single business.

Mitigation Strategies: Incorporation and Partnerships

The most common mitigation strategy is transferring properties to a limited company, which is not affected by Section 24. Companies deduct mortgage interest as a business expense before corporation tax at 25%. However, incorporation triggers capital gains tax and stamp duty land tax on the transfer, so the numbers must be modelled carefully.

Partnership structures can also help where one spouse is a basic-rate taxpayer. By adjusting profit-sharing ratios, more income can be allocated to the lower-earning partner. Some landlords also consider reducing leverage or overpaying mortgages to shrink the finance cost caught by Section 24.

Furnished Holiday Lets: FHL Regime Abolished

The Furnished Holiday Lettings (FHL) tax regime was abolished from 6 April 2025 (1 April 2025 for Corporation Tax) under the Finance Act 2025. Previously, FHLs were treated as trading income, allowing full mortgage interest deduction and bypassing Section 24 entirely. This exemption no longer applies.

From the 2025/26 tax year onwards, holiday let income is taxed identically to standard rental income. Section 24 mortgage interest restrictions now apply, capital allowances on new expenditure are no longer available (only Replacement Domestic Items Relief), and CGT business reliefs such as Business Asset Disposal Relief and rollover relief cannot be claimed. Landlords who previously relied on FHL status should review their tax position and consider whether incorporation or other mitigation strategies are appropriate.

Unequal Rental Income Split for Spouses: Form 17 vs the 50/50 Default Decision

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.

•11 min read

How to Claim Mortgage Interest on UK Rental Property 2025/26 (Section 24 in Practice)

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.

•8 min read

Furnished Holiday Let Tax: Rules, Abolition and What Happens Now

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.

•7 min read

Landlord Insurance and Tax: Deductible Premiums and Taxable Payouts

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.

•12 min read

Rent a Room Allowance 2026: £7,500 Tax-Free Guide for UK Landlords

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.

•12 min read

AIA Capital Allowance for Property Landlords: Disposal, Balancing Charges and the Claim Process

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.

•13 min read

Annual Investment Allowance UK: A Property Investor's Guide to the £1m Permanent Cap

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.

•14 min read

Writing Down Allowance on Cars: 2026/27 Rules for UK Property Investors

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.

•9 min read

April 2027 Property Tax Rates and Section 24: Enacted Position (Finance Act 2026)

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.

•12 min read

Finance Costs Under Section 24: What Counts and What You Can Claim

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.

•9 min read

How to Calculate Your Section 24 Tax Credit Step by Step

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.

•8 min read

Replacement of Domestic Items Relief: A Complete Guide for UK Landlords

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.

•13 min read

Section 24 and the 2027 Tax Year: What Should Landlords Do, and When?

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.

•11 min read

Section 24 and Employment Income: How PAYE Landlords Are Taxed

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.

•10 min read

Section 24 for Higher Rate Taxpayers: What the 42% Rate Means in 2027

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.

•11 min read

Section 24 and Interest-Only BTL Mortgages: Tax Planning Guide

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.

•9 min read

How Does Section 24 Affect Landlords with Multiple Rental Properties?

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.

•8 min read

Section 24 and the 60% Tax Trap: How Landlords Lose Their Personal Allowance

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.

•10 min read

Section 24 and Remortgaging Your BTL: Tax Implications

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.

•9 min read

Section 24 Tax Credit: How Does the 20% Basic Rate Relief Actually Work?

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.

•9 min read

How Does Tax Relief on Mortgage Interest for Rented Property Work in 2026?

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.

•7 min read

Section 24 Calculator: Work Out Your Landlord Tax Cost

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.

•9 min read

Section 24 and Pension Contributions: Tax Planning Strategies for Landlords

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.

•10 min read

Will Section 24 Be Reversed? The Realistic 2026 Outlook

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.

•7 min read

Rental Income Tax UK: Complete Guide for Landlords 2026

UK rental income is taxed on net profit at your marginal Income Tax rate (20%, 40% or 45% for 2026/27), with mortgage interest no longer deductible but instead relieved as a 20% basic-rate credit under Section 24. This guide sets out the rates, the full allowable-expense list, a worked Section 24 calculation, the property and rent-a-room allowances, Making Tax Digital quarterly filing (live from 6 April 2026 at £50,000), and the separate 22% / 42% / 47% property income rates that take effect from 6 April 2027 under Finance Act 2026.

•9 min read

Section 24 and Basic Rate Taxpayers: Are You Affected?

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.

•11 min read
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