How Does Section 24 Affect Landlords with Multiple Rental Properties?

Section 24 does not bite property by property. It pools every residential let you own personally, restricts relief on the whole finance cost to a flat 20% basic-rate credit, and then lets the rest of the tax system do its work on the inflated profit figure that results. For a single flat with a small mortgage that is an irritation. Across a portfolio of mortgaged buy-to-lets it compounds: a larger aggregate interest bill, a real risk of being dragged into higher-rate tax, and a cash-flow squeeze that can turn a profitable-looking portfolio into one that barely services itself.

This guide works through how the restriction stacks across multiple properties, with figures, and then sets out the responses that actually move the numbers. For the underlying mechanics, our complete Section 24 tax relief guide covers the rule from first principles.

How Section 24 applies across a whole portfolio, not per property

A common misconception is that Section 24 is calculated separately for each property, with the 20% restriction applied five times for five flats. It is not. Your UK residential lettings are a single property business. HMRC adds together the rental income from every residential property and the finance costs (mortgage interest and associated borrowing costs) from every residential property, then applies the restriction once, to the aggregate.

The mechanism is a basic-rate tax reducer. You compute your rental profit as if the mortgage interest were not deductible, tax that profit at your normal rates, and then reduce the tax bill by a credit equal to 20% of the lower of three figures: your total finance costs, your property profits for the year, or your adjusted total income above the personal allowance. Because the credit is the lower of those amounts, a year with heavy interest relative to profit can leave part of the finance cost unrelieved; the unused amount carries forward to a later year.

The practical consequence for portfolios is that the number that matters is your total mortgage interest, not the count of properties. Two landlords with five properties each can have very different exposures: one with low-geared, high-yielding stock barely notices Section 24, while one with high interest-only borrowing against modest rents is hit hard.

The cumulative impact: a worked example across three properties

Take a landlord with three buy-to-lets held personally:

• Property 1: GBP15,000 rent, GBP8,000 mortgage interest
• Property 2: GBP18,000 rent, GBP10,000 mortgage interest
• Property 3: GBP12,000 rent, GBP6,000 mortgage interest
• Other allowable expenses: GBP3,000 per property (GBP9,000 total)

Aggregate rent is GBP45,000, aggregate mortgage interest is GBP24,000, and other expenses are GBP9,000. Assume this is the landlord's only income beyond a salary that already uses the personal allowance, so the rental profit sits in the higher-rate band.

Under the pre-2017 rules, mortgage interest was a straight deduction. Taxable rental profit would have been GBP45,000 minus GBP9,000 minus GBP24,000, which is GBP12,000, taxed at 40% for GBP4,800 of tax.

Under Section 24 as it now stands, the interest is no longer deducted from profit. Taxable profit is GBP45,000 minus GBP9,000, which is GBP36,000. Tax at 40% is GBP14,400. The 20% credit on GBP24,000 of interest is GBP4,800. Net tax is GBP9,600.

Three-property portfolio (higher-rate landlord)	Pre-2017 rules	Section 24 (now)
Aggregate rent	GBP45,000	GBP45,000
Other expenses deducted	GBP9,000	GBP9,000
Mortgage interest deducted from profit	GBP24,000	GBP0
Taxable rental profit	GBP12,000	GBP36,000
Tax at 40%	GBP4,800	GBP14,400
Less 20% interest credit	n/a	GBP4,800
Net tax	GBP4,800	GBP9,600

Same properties, same rents, same interest. The tax bill doubles. The extra GBP4,800 is exactly 20% of the GBP24,000 mortgage interest, the gap between the 40% the landlord pays and the 20% they get back. That is the entire Section 24 cost in one line, and it scales directly with how much interest the portfolio carries.

The higher-rate trap and the threshold effect

The example above assumed the landlord was already a higher-rate taxpayer. The more insidious version is the landlord who is not, until Section 24 makes them one.

Because mortgage interest is stripped out of the profit figure, your reported property income is higher than the cash you actually keep. That inflated figure is what HMRC measures against the GBP50,270 higher-rate threshold. So a landlord whose genuine economic profit is GBP20,000 but whose accounts now show GBP44,000 of profit (because GBP24,000 of interest no longer reduces it) can find that adding one more property tips reported income over GBP50,270. From that point, the marginal band of income is taxed at 40% while the interest credit is stuck at 20%.

This is the cliff edge: the marginal property can cost far more in tax than its own rent would suggest, because it changes the rate that applies to your whole portfolio. It is also why two landlords with identical cash flow can pay very different tax depending on which side of the threshold their stripped-out interest leaves them. We cover the mechanics in detail in can Section 24 push you into higher-rate tax.

At the top end the same compounding continues. A landlord whose stripped-out profit pushes adjusted income above GBP100,000 starts to lose the personal allowance at GBP1 for every GBP2, an effective 60% marginal rate on that band, and income above GBP125,140 attracts the 45% additional rate while the credit remains 20%. None of this reflects extra economic gain; it reflects the accounting profit that Section 24 manufactures.

Cash flow: why the squeeze worsens with portfolio size

Section 24's deepest effect on multi-property landlords is on cash. In the three-property example the annual cash-flow reduction is GBP4,800, a real-terms cut despite identical property performance. Across a larger, more geared portfolio the gap is proportionally larger, and it lands at the worst possible moment, because higher interest rates simultaneously raise the mortgage payments and raise the restricted amount the tax credit fails to cover.

The hard cases are interest-only portfolios. Where the entire monthly payment is interest, the entire payment is caught by the restriction, and there is no capital repayment quietly reducing the debt over time. A landlord servicing several interest-only loans can find that rent comfortably covers the mortgage but not the mortgage plus the Section 24 tax, especially in a higher-rate year. Our guide on Section 24 and interest-only mortgages sets out how repayment structure changes the position.

Realistic responses for multi-property landlords

There is no single move that removes Section 24. Multi-property landlords combine several of the levers below, chosen against their own interest cost, marginal rate and holding horizon.

Spread income across spouses or civil partners

Spouses and civil partners are taxed independently. Allocating beneficial ownership so that rental income is shared can keep more of the profit inside one or both partners' basic-rate bands, where the 20% credit fully covers the 20% rate and Section 24 is broadly neutral. This needs genuine beneficial ownership, usually a declaration of trust, and a Form 17 election where legal title is held jointly. It carries capital gains tax and inheritance tax consequences on the transfer of shares, so it is a structuring exercise, not a quick fix.

Make pension contributions to extend your basic-rate band

Relievable pension contributions extend your basic-rate band by the gross amount contributed, pushing the point at which 40% tax starts further up. For a landlord sitting just over the higher-rate threshold because of stripped-out interest, a contribution can pull the marginal rental income back into the 20% band, where Section 24 stops biting. We explore this in Section 24 and pension contribution planning.

Reduce aggregate interest

Because the restriction tracks total interest, lowering it lowers the cost directly. Overpaying where lenders allow, moving some debt from interest-only to repayment, or selling the most heavily geared property can each cut the restricted amount. The trade-off is liquidity and the capital gains tax due on any disposal, so this is a portfolio-level decision rather than a reflex.

Consider incorporation, with eyes open

A limited company deducts mortgage interest in full before corporation tax, so Section 24 simply does not apply inside a company. For a highly geared, higher-rate portfolio that is a powerful difference. But incorporating an existing personal portfolio is a taxable event in itself, and the entry costs can erase years of saving. The comparison below frames the decision; the figures in any real case depend on gains, gearing and whether incorporation relief or partnership relief is in reach.

Factor	Personal ownership (Section 24 applies)	Limited company (Section 24 does not apply)
Mortgage interest relief	20% basic-rate credit only (22% from April 2027)	Full deduction against profit before corporation tax
Rate on profit	20%, 40% or 45% (22%, 42% or 47% from April 2027)	19% to 25% corporation tax, with marginal relief between GBP50k and GBP250k
Getting cash out	Profit taxed once, then yours	Further tax on dividends or salary when extracted
Cost to set up on existing portfolio	None (already held)	Potential CGT on transfer plus SDLT, unless relief applies
Ongoing admin	Self Assessment, plus MTD quarterly updates	Company accounts, corporation tax return, payroll and dividend records

There is no magic property count that makes incorporation worthwhile; the often-quoted "three to five properties" rule of thumb is a starting point, not an answer. What matters is your interest cost, your marginal rate, how long you intend to hold, and whether a relief can shelter the entry tax. Our buy-to-let limited company guide and the page on how the 2027 rates interact with Section 24 work through the trade-offs.

What April 2027 changes, and what it does not

From 6 April 2027, property income is taxed under its own rates, separate from earnings and other income: 22% basic, 42% higher and 47% additional. These were enacted in Finance Act 2026 and apply in England, Wales and Northern Ireland; only Scotland is carved out for 2027/28, setting its own rates as it already does. The Welsh self-setting power that some commentary refers to is a future provision not in force for 2027/28, so do not assume Wales or Northern Ireland set separate property rates from that date.

The point that is widely missed: the Section 24 basic-rate credit rises in step, from 20% to 22%. So no new wedge opens for basic-rate landlords. A landlord whose property income stays inside the basic-rate band pays 22% and relieves interest at 22%, broadly neutral on the interest restriction. The squeeze tightens for higher-rate landlords, who will pay 42% on rental profit but still relieve mortgage interest at only 22%, a 20-point gap on a potentially large aggregate interest figure. For multi-property portfolios carrying real debt, that is the number to model before 2027 rather than after.

MTD readiness for multi-property landlords

Making Tax Digital for Income Tax is live. It applies to landlords with qualifying income over GBP50,000 from 6 April 2026, over GBP30,000 from April 2027 and over GBP20,000 from April 2028. Qualifying income is measured on gross rents (plus any self-employment turnover), before expenses, so a multi-property landlord crosses the threshold on rent alone well before profit suggests it.

In practice that means digital records and quarterly updates, and it makes clean per-property bookkeeping of rent received and mortgage interest paid (kept distinct from capital repayments) a working necessity rather than a year-end scramble. Those are exactly the figures a correct Section 24 calculation depends on. Our Making Tax Digital for landlords guide sets out the timeline and what qualifying income includes.

When to take advice

Section 24 across a portfolio is where small structuring decisions move large numbers, and where the wrong move (an incorporation that triggers avoidable CGT and SDLT, a spouse transfer that creates an inheritance tax problem) can cost more than the tax it was meant to save. A specialist property accountant can model your real position: the marginal-rate effect of each property, whether incorporation relief is realistically available, how the 2027 rates land on your specific gearing, and what your MTD obligations now require. For a geared multi-property portfolio, that modelling usually pays for itself.