Section 24 has fundamentally changed how landlords calculate their tax bills. A section 24 calculator helps you understand exactly how mortgage interest restrictions affect your property income tax, but knowing how to use one properly is crucial for accurate results.

Want instant results? Use our free interactive Section 24 calculator to model your specific situation, then return here to understand what the numbers mean for your portfolio.

This guide explains what information you need, how the calculations work, and what the results mean for your property portfolio.

How Section 24 Calculations Work

The calculation process involves several steps that any reliable section 24 calculator should follow. You may have searched for a mortgage interest tax relief calculator. It's important to know that since the introduction of Section 24, these two terms refer to the same calculation for individual landlords. Before 2017, a mortgage interest tax relief calculator would simply deduct your full mortgage interest from your rental income. Today, a Section 24 calculator performs the newer, more complex calculation.

Step 1: Calculate Adjusted Profit

Instead of deducting mortgage interest from rental income, you now calculate profit as: Rental Income - All Other Allowable Expenses (excluding mortgage interest). This gives you your "gross" rental profit before the Section 24 restrictions apply.

Step 2: Determine Tax Liability

This adjusted profit gets added to your other income to determine your tax liability at the appropriate rates (20%, 40%, or 45%). This is crucial because Section 24's impact varies dramatically depending on whether you're a basic rate, higher rate, or additional rate taxpayer.

Step 3: Apply Tax Credit

You then receive a tax credit worth 20% of your mortgage interest payments, which reduces your overall tax bill. The relief works as a tax credit, not a deduction from rental income. This means it reduces your tax bill pound-for-pound, but only at the basic rate.

A landlord with £25,000 rental income, £15,000 mortgage interest, and £5,000 other expenses would have:

  • Adjusted profit: £20,000 (£25,000 - £5,000)
  • Tax credit available: £3,000 (20% × £15,000)

Information You Need for Accurate Calculations

Before using any section 24 calculator, gather these key figures for each tax year:

Rental Income Details

  • Gross rental income from all BTL properties
  • Any other property income (ground rent, service charges)
  • Rental income from furnished holiday lets (if applicable)

Allowable Expenses

  • Property management fees and letting agent costs
  • Repairs and maintenance (not improvements)
  • Insurance premiums for buildings and landlord cover
  • Legal and professional fees
  • Safety certificates and compliance costs

Mortgage Interest Information

  • Total mortgage interest paid on BTL loans
  • Any loan arrangement fees that qualify
  • Interest on loans for property improvements

Personal Tax Information

  • Your other income (salary, pensions, investments)
  • Current tax band (basic, higher, additional rate)
  • Personal allowance available

Understanding Your Calculator Results

When you run calculations using a section 24 calculator, focus on these key metrics:

Effective Tax Rate

This shows your real tax rate after accounting for the 20% credit. Higher and additional rate taxpayers typically see their effective rate on property income increase significantly.

Cash Flow Impact

The calculator should show how the tax changes affect your monthly or annual cash flow. This helps with budgeting and investment planning.

Break-Even Analysis

Some calculators show the rental yield you need to maintain positive cash flow after the additional tax burden.

Common Calculator Limitations

Most online section 24 calculators have limitations you should understand:

  • Simplified assumptions: They may not account for all allowable expenses or complex income structures
  • Static calculations: They don't model changes in interest rates or rental income over time
  • Portfolio complexity: Basic calculators struggle with mixed portfolios (BTL, FHL, commercial)
  • Tax planning opportunities: They don't suggest mitigation strategies like incorporation

For portfolios worth over £500,000 or complex situations, professional advice often provides more accurate projections than standard calculators.

Practical Section 24 Calculation Examples

Working out your annual Section 24 cost requires gathering specific figures from your property portfolio. Here's a systematic approach with examples.

Example 1: Basic Calculation

Consider Sarah, who owns three buy-to-let properties generating £45,000 annual rental income. Her expenses break down as follows:

  • Mortgage interest: £18,000
  • Repairs and maintenance: £4,000
  • Insurance and other costs: £3,000
  • Other income (salary): £35,000

Under the old system, Sarah's taxable rental income would have been £20,000 (£45,000 - £25,000 total expenses). Combined with her salary, her total taxable income was £55,000, putting her in the higher rate band.

Under Section 24, her taxable rental income becomes £38,000 (£45,000 - £7,000 non-mortgage expenses). Her total taxable income rises to £73,000, firmly in the higher rate band.

Sarah's Section 24 annual cost: (40% - 20%) × £18,000 = £3,600

Example 2: 2026/27 Calculation

A landlord with three BTL properties has:

  • Annual rental income: £48,000
  • Mortgage interest: £18,000
  • Other expenses: £8,000
  • Employment income: £45,000

Under Section 24, the calculation works like this:

Step 1: Calculate taxable rental profit
Rental income (£48,000) minus non-finance expenses (£8,000) = £40,000

Step 2: Add to total income
Employment income (£45,000) + rental profit (£40,000) = £85,000 total income

Step 3: Calculate tax relief
Mortgage interest (£18,000) × 20% = £3,600 tax credit

Without Section 24, this landlord would have deducted the full £18,000 mortgage interest, paying higher-rate tax on £67,000 instead of £85,000. The difference creates an additional tax burden of approximately £3,600 annually.

Impact of Section 24 on Different Taxpayers

Section 24 relief affects landlords differently depending on their tax position. Under Section 24, mortgage interest relief is capped at 20% of your allowable finance costs. This applies to individual landlords only — limited companies can still deduct mortgage interest as a business expense before calculating corporation tax.

Basic Rate Taxpayers

If your total income (including rental profits) stays within the basic rate band, Section 24 has minimal impact. You effectively get the same relief as before — 20% of your mortgage interest.

Higher Rate Taxpayers

This is where Section 24 bites hardest. Higher-rate taxpayers lose the benefit of 40% relief on mortgage interest, receiving only 20% instead. For a landlord with £20,000 annual mortgage interest, this represents a £4,000 annual tax increase.

Additional Rate Taxpayers

The impact is even more severe for additional rate taxpayers (45% band). The same £20,000 mortgage interest now provides £4,000 relief instead of £9,000 — a £5,000 annual increase in tax liability.

Strategies to Mitigate Section 24 Costs

Once you know your annual Section 24 cost, you can make informed decisions about your portfolio. The key is understanding that Section 24 costs aren't just a one-off calculation — they compound year after year. A £3,000 annual cost becomes £30,000 over a decade, making it worth serious consideration in your long-term planning.

Spousal Income Splitting

Transfer properties to a spouse in a lower tax band to reduce the overall Section 24 impact. This works best when one spouse has significantly lower income than the other.

Company Incorporation

Moving your property portfolio into a limited company eliminates Section 24 restrictions entirely. Company incorporation allows full mortgage interest deduction, though it introduces corporation tax (19% for profits up to £250k, 25% main rate) and other considerations. Compare your current tax position with running properties through a limited company structure. This often makes sense for portfolios generating significant profits.

Timing Capital Expenditure

Large capital expenses can be timed to reduce rental profits in high-income years, minimising the Section 24 impact when combined with other income sources.

Alternative Structures

Explore options like pension SIPPs, joint ownership arrangements, or furnished holiday lets (which have different tax rules) or commercial property investments that aren't subject to Section 24.

When to Consider Professional Advice

Section 24 calculations can become complex when combined with multiple income sources, capital gains, and family tax planning. Consider specialist property tax advice if:

  • Your total income fluctuates around tax band thresholds
  • You're considering incorporation or property transfers
  • You have significant capital gains alongside rental income
  • You're planning major property portfolio changes

A property tax specialist can model different scenarios using professional calculation tools to show the long-term impact of various strategies. For complex situations involving multiple properties or significant mortgage interest payments, speaking with a property tax specialist can help you understand all available options and their long-term implications.

Planning for 2026/27 and Beyond

Section 24 isn't changing for 2026/27, but other factors will affect your tax position:

Making Tax Digital: From April 2026, landlords with property income over £10,000 must use MTD-compliant software and file quarterly updates. This won't change Section 24 relief calculations but requires more detailed record-keeping.

Tax Band Changes: Keep track of personal allowance and tax band thresholds, as these affect whether Section 24 pushes you into higher tax brackets.

Interest Rate Environment: Rising mortgage rates increase your finance costs but remember — you only get 20% relief on the additional interest under Section 24.

The key is using calculator results as a starting point for broader tax planning conversations with qualified property tax specialists.

Getting Accurate Results and Next Steps

To ensure your section 24 calculator gives meaningful results:

  • Use actual figures from your accounts, not estimates
  • Include all allowable expenses, not just the obvious ones
  • Consider your total income picture, not just property
  • Run multiple scenarios with different rental income and interest rate assumptions

Remember that Section 24 calculations can be complex, particularly for larger portfolios or unusual circumstances. While online calculators provide useful estimates, they're no substitute for professional advice tailored to your specific situation.

The bottom line is that Section 24 relief in 2026 remains limited to 20% of your mortgage interest and finance costs. For many landlords, particularly higher-rate taxpayers, this represents a significant ongoing tax cost compared to the pre-2017 position. The key is understanding exactly how Section 24 affects your specific situation and exploring legitimate strategies to minimise its impact.