How Section 24 Applies When You Remortgage a BTL Property

Remortgaging a buy-to-let does not move the goalposts on Section 24, but it does change the size of the pitch. The rule itself is unchanged by refinancing: every pound of qualifying mortgage interest, whether on your original loan or on fresh borrowing raised when you remortgage, is relieved only as a basic-rate tax credit, never as a deduction from rental profit. What a remortgage changes is the amount of interest in play, and, when you release equity, whether that interest qualifies for relief at all.

This matters because a remortgage is often the moment a landlord's tax position quietly deteriorates. Pull out cash for a deposit elsewhere, switch to a higher rate at the end of a fix, or move from interest-only to repayment, and the figure that lands in your tax return can behave very differently from the figure your lender quotes. Below we work through how Section 24 treats each scenario, where the relief is lost entirely, and how the rate change arriving in April 2027 reshapes the arithmetic.

How Section 24 treats remortgage interest

Section 24 of the Finance (No. 2) Act 2015 removed mortgage interest as an allowable deduction against residential rental profit for individual landlords. Instead of reducing your taxable profit, interest now generates a tax credit worth the basic rate of the interest paid. For 2026/27 that credit is 20%; from 6 April 2027 it rises to 22% in step with the new property basic rate (more on that below). The full mechanics, including the carry-forward of any unused credit, are set out in our complete guide to Section 24 finance costs.

When you remortgage, all of this carries over without modification. The credit is calculated on the total qualifying finance cost for the tax year, so it does not matter whether you remortgaged once, twice or stayed put: HMRC pools the year's interest and applies the basic-rate credit to the lot. A remortgage is relevant to the figure, not to the rule.

Qualifying finance costs that get pooled and restricted include:

• Interest on the original purchase mortgage
• Interest on a remortgage with the same lender (a product transfer)
• Interest on a remortgage to a new lender
• Interest on additional borrowing secured against the property, where the funds are used for the property business
• Incidental finance costs: arrangement fees, broker fees, valuation fees and certain legal costs of obtaining the loan

The one thing a remortgage can change is whether the interest qualifies at all. That turns entirely on what the money was used for, which we cover in the equity-release section.

What a remortgage does to your tax bill: a worked example

Take a higher-rate landlord who remortgages a single buy-to-let, increasing the loan from £200,000 to £300,000 to fund works and release some cash into the business, at 5% interest. Annual interest rises from £10,000 to £15,000. Assume £18,000 of rent and £2,000 of other allowable costs.

Step	Before remortgage	After remortgage
Rental income	£18,000	£18,000
Allowable costs (non-finance)	£2,000	£2,000
Mortgage interest (NOT deducted)	£10,000	£15,000
Taxable rental profit	£16,000	£16,000
Tax at 40%	£6,400	£6,400
Section 24 credit (20% of interest)	£2,000	£3,000
Net income tax on the property	£4,400	£3,400

The taxable profit is identical at £16,000 in both columns, because the interest is never deducted. The credit rises with the interest, but only at 20%. Now compare this with the world before Section 24, where the higher-rate landlord could deduct the full £15,000 of interest: their tax would have been (£18,000 minus £2,000 minus £15,000) at 40%, just £400. The £3,400 actual bill versus the £400 old-rules bill is the cost of Section 24 on this remortgage, and it grows pound for pound as borrowing rises.

The deeper trap is that the un-deducted interest inflates your taxable income. With £16,000 of rental profit stacked on top of employment income, the remortgage can tip a landlord into the higher-rate band, or into the 60% effective rate zone between £100,000 and £125,140 where the personal allowance tapers away one pound for every two pounds of income. The Section 24 credit does not undo that taper. If a remortgage threatens to push you over £100,000, the timing of the refinance and any rent reviews deserves real attention.

Releasing equity: when remortgage interest stops qualifying

This is where the largest, and most commonly missed, tax cost sits. Section 24 relief, even at the restricted basic rate, is only available on interest where the borrowing was used for the property business. When you remortgage to release equity, the interest on the released funds follows the money, not the bricks.

HMRC looks at what the cash was spent on, not which property secured the loan. That produces two clean categories:

Use of released funds	Relief available	Examples
Qualifying (property business)	Basic-rate credit (20%, 22% from 2027/28)	Deposit on another rental, improving a let property, funding letting-business costs
Non-qualifying (personal or non-property)	No relief at all	Funding your own home, a car, school fees, a non-property investment

So a landlord who remortgages a £250,000 rental to release £80,000 toward a deposit on a second rental keeps full qualifying status: the interest on the whole loan still feeds the Section 24 credit. A landlord who releases the same £80,000 to extend their own home gets no relief on the interest attributable to that £80,000, even though the loan is secured on a rental and shows up on the buy-to-let mortgage statement. You apportion the interest in proportion to the borrowing and exclude the non-business slice.

There is a well-established planning point worth knowing: where you originally introduced capital into the property business (for example, a property brought into letting when its market value exceeded the original mortgage), you can often draw funds back out up to that introduced capital and still treat the interest as qualifying, on the basis that you are withdrawing your own invested capital from the business. This is genuinely useful but fact-sensitive, and HMRC scrutinises it, so it should be documented and, ideally, checked before you draw down.

Interest-only versus repayment after a remortgage

Remortgaging is the usual trigger for switching mortgage type, and the two structures behave differently under Section 24, though not in the way many landlords assume.

Feature	Interest-only	Repayment
Qualifies for Section 24 credit	The full interest payment	The interest element only
Capital repayment relief	None (no capital repaid)	None (capital repayment never allowable)
Monthly cash outflow	Lower	Higher
Interest over time	Flat on a static balance	Falls as the balance reduces
Credit over time	Stable	Shrinks as the balance, and so the interest, falls

The key point is that capital repayment was never an allowable cost in the first place, so switching to repayment does not lose you any relief you previously had. What it does is reduce your monthly cash flow while quietly shrinking the only part of the payment that generates a tax credit. On a high-rate, higher-leverage portfolio, that combination of more cash out and less tax relief makes the after-tax cost of repayment higher than the headline rate suggests. The right answer depends on your wider goals (deleveraging for resilience versus maximising current cash flow), not on tax alone, but the tax effect should be modelled rather than guessed.

Section 24 and the basic-rate landlord: a different picture

For a landlord whose total income (including the full, undeducted rent) stays within the basic-rate band, Section 24 is broadly neutral. The credit is given at 20%, and their marginal rate on the income is also 20%, so the restriction does not bite. The risk for these landlords is not the rule itself but the threshold: a sizeable remortgage that raises rent, or stacking rental income on a salary, can push total income into the higher-rate band, at which point the credit no longer matches the rate and the wedge appears. We explore exactly when this tips over in can Section 24 push you into higher-rate tax. If you want to see the credit calculated line by line, the step-by-step Section 24 credit calculation walks through the three-part cap.

What changes from April 2027

Finance Act 2026 (Royal Assent 18 March 2026) introduced separate property income tax rates from 6 April 2027. For property income arising in England, Wales and Northern Ireland, the rates become 22% basic, 42% higher and 47% additional. Only Scotland is carved out, where Holyrood-set rates continue to apply to property income. This is enacted law, not a proposal.

Crucially for remortgaging decisions, the same Act raises the Section 24 finance-cost reducer to 22% in step (Finance Act 2026 Schedule 1, amending the relevant ITTOIA 2005 and ITA 2007 provisions). The reducer is not frozen at 20%. The practical consequences are easy to state:

Landlord band	2026/27 wedge	2027/28 wedge	Effect
Basic rate	20% credit vs 20% rate: no wedge	22% credit vs 22% rate: no wedge	Still neutral
Higher rate	40% rate less 20% credit = 20 points	42% rate less 22% credit = 20 points	Unchanged
Additional rate	45% rate less 20% credit = 25 points	47% rate less 22% credit = 25 points	Unchanged

So the headline fear, that 2027 opens a new gap for landlords, is wrong: the wedge is the same width because the credit rises in lockstep with the rate. What does change is that the absolute tax on rental income climbs by two points across all bands, which makes a heavily remortgaged, low-margin property a little tighter on cash. If you are modelling a 2027 refinance, use the 22% credit and the new rates rather than the 2026/27 figures. The fuller picture is in our guide to the 2027 property income tax rates for landlords.

Should a remortgage prompt incorporation?

Because companies deduct mortgage interest in full and Section 24 simply does not apply to them, a remortgage that materially worsens a higher-rate landlord's after-tax cash flow is one of the classic triggers for looking at a limited company. But a remortgage is a poor reason on its own to incorporate, because incorporation brings its own tax events and frictions.

Factor	Personal ownership	Limited company
Mortgage interest	Basic-rate credit only (Section 24)	Deducted in full before corporation tax
Tax on profit	22/42/47% from 2027/28 (England, Wales, NI)	Corporation tax, then tax on extraction
Transfer of existing property	n/a	CGT on transfer unless incorporation relief is claimed; SDLT usually due
Getting money out	Already personal	Dividends or salary, taxed again on extraction
Mortgage market	Wider, cheaper products	Narrower, typically higher rates

Note that since Finance Act 2026, section 162 incorporation relief must be claimed for transfers on or after 6 April 2026; it is no longer automatic. The decision turns on gearing, your marginal rate, how long you intend to hold, and whether you need the rental income to live on or can leave it to roll up in the company. We set out the trade-offs in detail in the complete guide to buy-to-let limited companies. The honest answer for most landlords is to model both routes on real figures before letting a single remortgage drive a structural change.

Record-keeping and MTD when you remortgage

A remortgage creates exactly the kind of detail HMRC may later ask about, so the records need to be clean from the start. Keep:

• The original and new loan amounts, lenders and interest rates
• A clear record of what any additional borrowing was spent on (the qualifying-purpose trail)
• The apportionment between business and non-business use where a single loan funds both
• Arrangement, broker, valuation and legal fees
• Interest paid through the tax year, supported by lender statements

This is no longer just good housekeeping. Making Tax Digital for Income Tax is live from 6 April 2026 for landlords with qualifying income above £50,000, extending to £30,000 from April 2027 and £20,000 from April 2028. You keep digital records and submit quarterly updates, with the Section 24 credit applied at the final declaration rather than quarter by quarter. Capturing remortgage detail digitally as it happens avoids reconstructing it under deadline pressure. If you are getting set up, see our step-by-step MTD registration guide for landlords.

Where this leaves you

The practical takeaways are narrow but important. A remortgage never changes the Section 24 rule; it changes the interest figure that rule applies to, and, when you release equity, whether that interest qualifies at all. Released funds spent on the property business keep their basic-rate relief; funds spent personally lose it entirely. The 2027 rate rise lifts the credit to 22% alongside the new rates, so no new wedge opens, but the absolute tax on rental income edges up. And incorporation, while it sidesteps Section 24, is a structural decision that a single refinance rarely justifies on its own.

If you are weighing a remortgage, releasing equity, or wondering whether your numbers point toward a company, a specialist property accountant can model the after-tax cash flow on your actual figures alongside a buy-to-let mortgage adviser, so the financing and the tax are decided together rather than one after the other.