Tax Relief on Mortgage Interest for Rented Property

If you borrow money to buy a rental property, can you deduct the interest from your rental income for UK tax? The short answer is no, not as a deduction any more. Since April 2020 you get a basic-rate tax credit instead, worth 20% of your finance costs for 2026/27 and rising to 22% from 6 April 2027. That single change, from a deduction at your top rate to a credit at the basic rate, is behind most of the confusion landlords have about mortgage interest, and it is the thing this page sets out to clear up.

This is an overview. It explains in plain English what changed, what the relief covers, and why companies are treated differently, then points you to the specific guides where the detail lives: how to claim it, whether arrangement fees count, the cap that can reduce the credit further, and how the underlying restriction (commonly called Section 24) actually works.

Deduction or credit: what actually changed

Before April 2017 a landlord deducted mortgage interest from rental income like any other running cost. A higher-rate taxpayer with £10,000 of interest therefore saved £4,000 in tax, because the interest came off income that would otherwise have been taxed at 40%. The relief was worth your marginal rate.

The rules changed through a four-year phase-in and have applied in full since the 2020/21 tax year. Now the interest is added back when working out your taxable rental profit, you are taxed on that higher profit at your normal rate, and then a separate basic-rate tax reduction is set against the bill. The same higher-rate landlord with £10,000 of interest now gets a £2,000 credit (20% of £10,000) rather than £4,000 of relief. The interest still reduces the tax, but at a fixed basic rate, not at your top rate.

The legal machinery sits in the Income Tax (Trading and Other Income) Act 2005. Section 272A stops finance costs being deducted from the profits of a residential property business, and s.274A and s.274AA give individuals the basic-rate tax reduction in their place. (Partnerships are handled through the equivalent provisions in the Income Tax Act 2007, but for most landlords the individual route is what matters.) The restriction was introduced by section 24 of the Finance (No. 2) Act 2015, which is why advisers and search engines alike still call the whole thing Section 24. For the regime in full, including the repeal question and the strategy menu, see our guide to the Section 24 mortgage interest restriction.

What the relief covers and what it does not

The basic-rate credit applies to finance costs. That means the mortgage interest itself, plus the costs of arranging the borrowing such as arrangement and product fees, broker fees, valuation or survey costs required for the mortgage, and the legal fees on the mortgage documentation (not the conveyancing on the purchase). Interest on a loan taken out to fund a deposit or a property improvement for the rental business counts too, because relief follows the purpose of the borrowing.

Three things do not get the credit. Capital repayments give no relief at all, because only the interest part of a mortgage payment is a finance cost. The cost of buying the property itself, including stamp duty land tax and the purchase conveyancing, is capital and goes towards your base cost for capital gains tax rather than against rental income. And everything that is not a finance cost (repairs, insurance, letting-agent fees, ground rent, accountancy) is unaffected by Section 24 and still comes off your rental income in full before tax.

The table below summarises the split. For a deeper treatment of which fees qualify, see our guide to whether mortgage arrangement fees are deductible for landlords, and for the full catalogue of everything else you can claim, see the complete list of landlord tax deductions.

Cost	How it is relieved	Why
Mortgage interest on the rental property	Basic-rate credit (20%, 22% from 2027/28)	Core finance cost under ITTOIA 2005 s.272A
Mortgage arrangement and product fees	Basic-rate credit	Treated as a finance cost
Mortgage broker fees	Basic-rate credit	Cost of arranging the borrowing
Survey or valuation for the mortgage	Basic-rate credit	Required to obtain the finance
Interest on a deposit or improvement loan used for the rental business	Basic-rate credit	Relief follows the purpose of the loan
Capital repayments of the mortgage	No relief	Only the interest portion is a finance cost
Personal-residence mortgage interest	No relief	Not borrowing for the rental business
Stamp duty land tax and purchase conveyancing	No income-tax relief (capital)	Adds to the CGT base cost, not a revenue cost
Repairs, insurance, letting-agent and accountancy fees	Deducted in full before tax	Not finance costs, so outside Section 24

You may get back less than 20% of your interest

The credit is not simply 20% of your interest in every case. It is the lower of three figures: the basic-rate percentage applied to your finance costs, to your rental profits, or to the income you have above your personal allowance. A landlord with large interest and a thin rental profit can therefore see the credit capped below the headline amount, and the part that is left over is carried forward to future years rather than lost.

This is the area where it is easiest to get the numbers wrong, so we keep the worked examples and the carry-forward rules in one place. If you want to see how the three-way cap is calculated, with figures, read our guide to claiming mortgage interest relief on a rental property under Section 24. For the broader question of whether the interest is relievable at all in your circumstances, see whether mortgage interest is deductible for landlords in 2026.

What happens in 2027

From 6 April 2027 there are separate income tax rates for property income: 22% basic, 42% higher and 47% additional. These apply across England, Wales and Northern Ireland (Scotland is outside the change for 2027/28). They were enacted by the Finance Act 2026, which received Royal Assent on 18 March 2026, so this is settled law rather than a proposal.

The finance-cost credit rises in step. The Finance Act 2026 swapped the basic rate for the new property basic rate inside ITTOIA 2005 s.274AA, so from 2027/28 the credit is calculated at 22% rather than 20%. Because the credit goes up by the same amount as the rate, no new gap opens up for higher-rate landlords. The full picture of the new rates sits in our guide to the 2027 property income tax rates for landlords.

Why companies are treated differently

Section 24 applies to individuals, partnerships and trusts, but not to companies. A company that holds rental property deducts its mortgage interest in full against rental income before corporation tax, exactly the way the old rules used to work for everyone. That is the single biggest reason higher-rate landlords with heavy interest bills look at holding property through a limited company.

It is rarely a simple decision, though. Moving existing properties into a company can trigger stamp duty land tax and capital gains tax, and there is ongoing company administration to weigh against the relief saved. We set out the trade-offs in the buy-to-let limited company guide, and the specific question of incorporating without an immediate CGT charge in its own guide.

Reporting it correctly

On a self-assessment return, residential finance costs go in the dedicated finance-cost box on the SA105 property pages, not in the general expenses, so that HMRC applies the basic-rate credit rather than a full deduction. Our SA105 property income form guide walks through the boxes.

Keeping the right records makes this straightforward: annual mortgage statements showing the interest paid, loan agreements for any deposit or improvement borrowing, and a clear split between any personal and rental borrowing. The split matters because only interest on borrowing used for the property business qualifies, and mixed-use loans have to be apportioned and evidenced.

From 6 April 2026, Making Tax Digital for Income Tax is mandatory for landlords with qualifying income above £50,000, falling to £30,000 from April 2027 and £20,000 from April 2028. That means quarterly digital updates, and your software needs to handle the finance-cost credit correctly rather than treating the interest as an ordinary expense.

Where to read the detail

This page is the orientation. For the specifics, the cluster splits the work as follows: whether your interest is relievable at all is covered in is mortgage interest deductible for landlords; how to actually claim it, including the three-way cap and carry-forward, in claiming mortgage interest relief under Section 24; the treatment of fees in are mortgage arrangement fees deductible; and the regime as a whole in the Section 24 mortgage interest restriction guide.

If your situation runs across several properties, mixed personal and rental borrowing, joint ownership or a possible company move, the calculations stop being mechanical. A property accountant can confirm the relief is being claimed correctly and that you are not leaving the carried-forward portion on the table.