A section 24 calculator answers one question: how much more tax do you pay because mortgage interest no longer comes off your rental profit? Everything else (the worked examples, the band checks, the planning routes) hangs off that single number. This guide shows you which figures to feed in, how to read the result, and what to do once you can see the size of the cost.
If you want the figures first, our interactive property tax calculators let you model your own portfolio, then come back here to understand what the output means and where it can be misleading.
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What a Section 24 calculator actually measures
Before 2017, a landlord deducted mortgage interest from rent and paid tax on the difference. Since the full restriction took effect in 2020/21, individual landlords no longer do that. Instead the calculator does three things: it taxes your rental profit before deducting interest, then gives back a tax reducer worth the basic rate of your finance costs, capped so it never exceeds the tax genuinely due. A mortgage interest tax relief calculator and a Section 24 calculator are therefore the same tool for individuals: the old phrase survives, but the calculation behind it is the post-2017 one.
The reducer is a tax credit, not a deduction. That distinction is the whole story. A deduction comes off your income at your top rate; the reducer comes off your tax bill at the basic rate only. For a basic-rate landlord those are equal and nothing is lost. For a higher or additional-rate landlord they are not, and the difference is the section 24 cost the calculator exists to show you.
The five figures you need before you start
A calculator is only as good as its inputs. Gather these for the tax year, using real numbers from your records rather than estimates:
- Gross rental income from every UK residential let, before any costs.
- Allowable expenses excluding finance costs: letting agent fees, repairs and maintenance (not improvements), buildings and landlord insurance, ground rent, service charges, safety certificates, accountancy.
- Total mortgage and loan interest on residential lettings, plus incidental costs of obtaining finance such as broker and arrangement fees. On an interest-only mortgage this is the whole payment.
- Your other income: salary, pension, dividends, savings interest. This fixes your tax band once rental profit is stacked on top.
- Your personal allowance, and whether it is tapered (it falls by £1 for every £2 of income over £100,000, gone entirely at £125,140).
If you co-own with a spouse, enter only your share of income and interest. For jointly held property the default split is 50/50; a Form 17 election changes that to your true beneficial ownership.
How the calculation runs, step by step
Step 1: taxable rental profit, before finance costs
Rents minus all non-finance expenses. Mortgage interest stays in this figure. This larger profit is what the tax bands are applied to, which is exactly why Section 24 can inflate the income HMRC sees.
Step 2: tax on that profit at your marginal rate
The profit is added to your other income and taxed in band order. For 2026/27 the bands are 20%, 40% and 45%. This is where the calculator decides whether you are effectively a basic, higher or additional-rate landlord.
Step 3: the basic-rate tax reducer
You receive a tax reducer worth the basic rate of your finance costs: 20% for 2026/27. On £15,000 of interest that is a £3,000 reduction to your tax bill, no more, whatever your top rate.
Step 4: the three-part cap
The reducer is then limited to the lower of three figures, all at the basic rate: your finance costs, your property profits before finance costs, and your income above the personal allowance. Where a lower limb bites, the unrelieved interest carries forward indefinitely. Our step-by-step guide to the Section 24 tax credit works the cap in full, including loss and carry-forward cases.
Step 5: read the cost
The number that matters is the gap between tax under the old full-deduction rules and tax under Section 24. That gap is your annual cost. A quick sense-check: for a higher-rate landlord it is roughly 20% of finance costs; for an additional-rate landlord, roughly 25%.
Worked examples: what the calculator shows for each taxpayer
Section 24 lands differently depending on where your income sits. These examples use 2026/27 rates and the £12,570 personal allowance, £50,270 higher-rate threshold.
Example 1: the higher-rate landlord
Priya earns £45,000 from employment and owns three flats producing £25,000 rent, with £15,000 mortgage interest and £4,000 of other expenses.
- Taxable rental profit before finance costs: £25,000 − £4,000 = £21,000
- Total income: £45,000 + £21,000 = £66,000, so the top slice is higher rate
- Tax reducer: 20% × £15,000 = £3,000
- Old rules would have given 40% relief on the £15,000 interest = £6,000
- Annual Section 24 cost: £6,000 − £3,000 = £3,000
Priya's real profit is modest, but she is taxed on £21,000 of property income and only claws back relief at 20%.
Example 2: pushed into the higher-rate band
Tom earns £42,000 as a teacher and lets one former family home for £14,000 rent, with £10,000 interest and £2,000 expenses. His real economic profit is only about £2,000.
- Taxable rental profit before finance costs: £14,000 − £2,000 = £12,000
- Total income: £42,000 + £12,000 = £54,000, so £3,730 sits above the £50,270 threshold and is taxed at 40%
- Tax reducer: 20% × £10,000 = £2,000
Tom thought of himself as a basic-rate taxpayer. Section 24 added his full rent to income, tipped part of it into the higher-rate band, and capped his interest relief at 20%. This is the single most common Section 24 trap, and we cover it fully in can Section 24 push you into higher-rate tax.
Example 3: the £100k rental portfolio
A landlord with £100,000 gross rent, £45,000 mortgage interest and £20,000 of other expenses, plus a small salary, is firmly in the higher-rate band on property income alone.
- Taxable rental profit before finance costs: £100,000 − £20,000 = £80,000
- Tax reducer: 20% × £45,000 = £9,000
- Old rules would have given 40% relief = £18,000
- Annual Section 24 cost: around £9,000
At this scale the restriction compounds: roughly £9,000 a year is close to £90,000 across a decade. That is the level at which incorporation usually earns a serious look. Our £100k rental income case study models this portfolio in depth.
Example 4: the basic-rate landlord (no cost)
Maria has no other income and lets two properties for £18,000 rent, with £6,000 interest and £3,000 expenses. Profit before interest is £15,000, well inside the basic-rate band. Her 20% reducer exactly matches the 20% she would have saved by deducting interest, so her Section 24 cost is nil. Section 24 is not a universal penalty; it is a higher-rate one.
Reading the result: effective rate and cash flow
Two outputs matter beyond the headline cost. The effective tax rate on property income tells the real story: a higher-rate landlord with heavy interest can pay an effective rate well above 40% on economic profit, because tax is charged on profit before interest while relief comes back at only 20%. The cash flow impact matters because Section 24 tax is paid from after-tax cash that mortgage interest has already eaten into. A portfolio that looks profitable on paper can run a cash deficit once the Section 24 bill lands, particularly for interest-only borrowers in a higher-rate band.
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What changes from 6 April 2027
From 6 April 2027, property income in England, Wales and Northern Ireland is taxed at separate rates of 22% basic, 42% higher and 47% additional, enacted by Finance Act 2026 (Royal Assent 18 March 2026). The Section 24 reducer rises in step to 22%, tracking the new basic rate.
The important point, and one many landlords get wrong, is that this opens no new wedge. Because the reducer (22%) matches the basic property rate (22%), a basic-rate landlord is no worse off. A higher-rate landlord's relief improves from 20% to 22%, but the gap to their 42% rate is essentially the same as today's 40% versus 20% gap. Only Scotland sits outside these rates, with Holyrood-set rates on property income. A good calculator should let you toggle to 2027/28 to see the small relief uplift, but do not expect it to change your structural decision.
| Feature | 2026/27 | 2027/28 onwards |
|---|---|---|
| Property income rates (England, Wales, NI) | 20% / 40% / 45% | 22% / 42% / 47% |
| Section 24 finance cost reducer | 20% of finance costs | 22% of finance costs |
| Basic-rate landlord new wedge? | None | None (reducer tracks the 22% rate) |
| Higher-rate relief gap | 20pp (40 − 20) | 20pp (42 − 22) |
| Additional-rate relief gap | 25pp (45 − 20) | 25pp (47 − 22) |
What the calculator cannot do: the planning routes
A calculator shows the cost. It will not tell you which structure fits your figures. Once you can see the number, these are the routes that genuinely reduce it.
Limited company versus staying personal
A company is not subject to Section 24. It deducts mortgage interest in full and pays corporation tax on the lower profit (19% up to £50,000, 25% above £250,000, marginal relief between). For a higher-rate landlord with a large interest bill who reinvests profits, the company route often wins outright. The catch is the cost of getting property in: transferring from personal to company is a disposal for CGT (residential gains at 18% and 24%) and a purchase for SDLT, so the one-off bill can be substantial. Weigh both sides with our buy-to-let limited company guide before committing.
Spousal income splitting
If one spouse pays tax at a lower rate, shifting rental income towards them reduces the overall bill. For jointly owned property a Form 17 election moves the split from the automatic 50/50 to true beneficial shares. This works best where the lower-earning spouse has spare basic-rate band, and it is one of the few moves that needs no company and no SDLT.
Pension contributions
A personal pension contribution extends your basic-rate band by the gross amount paid in. For a landlord whose property profit has tipped them just into higher-rate tax, a well-judged contribution can pull that income back below the threshold, restoring the position where the 20% reducer matches the rate on the income. It also builds retirement savings, so the relief works twice. See our note on Section 24 and pension contributions for how to size this.
Timing capital expenditure
Large allowable revenue costs (a significant repair, for example) reduce rental profit in the year they fall. Timing them into a high-income year can keep total income below a band threshold, indirectly softening the Section 24 effect on that year's marginal income.
MTD for Income Tax: the reporting backdrop
Making Tax Digital for Income Tax is now live and changes how you report rental income, not how Section 24 is calculated. From 6 April 2026, landlords with qualifying income over £50,000 must keep digital records and file quarterly updates; the threshold falls to £30,000 from 6 April 2027 and £20,000 from 6 April 2028. The Section 24 reducer is applied at the final declaration, so the restriction is unchanged, but your finance cost figures now need to be accurate and digital all year. In practice that makes running a Section 24 calculation a quarterly habit rather than a January panic. If you are getting set up, see how to register for MTD as a landlord.
When the number warrants advice
A calculator is enough for a clean, personally held portfolio. Bring in a specialist where the figures get tangled: income hovering around a band threshold, a possible incorporation, property transfers between spouses, significant capital gains alongside rental income, or a mixed portfolio split across personal and company ownership. In those cases a single calculator number can hide more than it reveals, and the right structure can change the answer materially. Our overview of what a property accountant does sets out where that judgement adds value.
The bottom line
Section 24 remains fully in force, and for higher and additional-rate landlords it is a real, recurring cost: roughly 20% to 25% of your finance costs every year, compounding over the life of the portfolio. A calculator turns that into a figure you can act on. The 2027 move to a 22% reducer helps a little and opens no new basic-rate wedge, but it does not change the structural decision. Use the number to ask the right next question: stay personal, split with a spouse, contribute to a pension, or incorporate? The figure is the start of that conversation, not the end of it.