What is Section 24 of the Finance (No. 2) Act 2015?

Section 24 is the legislative provision that progressively withdrew full income tax relief on mortgage interest for individual residential landlords. The phase-in ran from 6 April 2017 to 6 April 2020. From the 2020/21 tax year onwards individuals get no deduction for finance costs against rental income at all - instead, a flat 20% basic-rate tax reducer is applied against the income tax liability. The corresponding statutory wording sits at ITTOIA 2005 sections 272A-272B and 274A-274C (inserted by Finance (No. 2) Act 2015 and amended by Finance Act 2017).

Why does Section 24 hurt higher-rate landlords?

Pre-2017, a 40% taxpayer paying £10,000 of mortgage interest got £4,000 of tax relief - the interest reduced rental profit which was then taxed at 40%. Under Section 24 the relief is capped at 20% (£2,000) no matter the landlord's marginal rate. That same £10,000 of interest now costs a 40% taxpayer £2,000 more per year, and a 45% taxpayer £2,500 more. For highly geared portfolios, the post-S24 tax bill can exceed the pre-tax rental profit, producing a loss on paper while cash flow stays positive.

Does Section 24 apply to limited companies?

No. Section 24 only restricts relief for individuals (sole / joint owners) of residential property. Limited companies (SPVs holding buy-to-let portfolios) continue to deduct mortgage interest in full as a normal business expense, computing Corporation Tax on the post-interest profit. This is the principal structural reason for the post-2017 wave of portfolio incorporations - higher-rate landlords often save tax by transferring properties to a Ltd company, though the SDLT, CGT, and refinancing costs of incorporation usually require a 5-10 year horizon to break even.

How is the 20% tax credit capped?

The basic-rate credit is the LOWER of three numbers: (a) the mortgage interest paid in the year, (b) the property business profits for the year (i.e. rental income minus all other allowable expenses), and (c) total income chargeable to income tax that exceeds the personal allowance. Excess interest above the cap can be carried forward indefinitely against future years - but if your property profits are persistently lower than your interest costs, the carry-forward never gets fully utilised in practice.

Are Furnished Holiday Lets affected by Section 24?

Until 5 April 2025, FHLs were specifically exempt from Section 24 - landlords could deduct interest in full as if running a trade. The FHL regime was abolished from 6 April 2025 (announced Spring Budget 2024, legislated in Finance Act 2024). From 2025/26 onwards, properties that previously qualified as FHLs now fall under the standard property income rules - meaning Section 24's interest restriction applies, capital allowances on furnishings are no longer available, and gains on disposal lose the 10% Business Asset Disposal Relief rate. See our FHL abolition guide for the full impact list.

Does Section 24 apply to commercial property landlords?

No. Section 24 restricts relief only on finance costs incurred for residential let property held by individuals. Commercial property (offices, warehouses, retail units, mixed-use property where the residential element is incidental) is unaffected - mortgage interest remains a fully deductible expense against commercial rental profit. Mixed-use properties (e.g. a shop with a flat above) require apportionment of finance costs between residential and commercial elements.

How does Section 24 interact with the £100k personal allowance taper?

Under post-S24 rules, mortgage interest no longer reduces taxable income - rental profits flow through gross. That pushes more landlords into the £100,000 to £125,140 personal allowance taper, where each £1 of additional income costs 60p in tax (the basic-rate credit on interest is calculated separately and only partially offsets this). A £75,000-salary landlord with £15,000 of net rental income (after interest) had pre-S24 taxable income of £90,000 - all in the 40% band. Post-S24, if interest was £8,000, taxable income is £98,000 - still under the taper, but only just. A larger portfolio can easily tip the same landlord into the 60% zone with no real change in cash flow.

Can I just put properties into a Ltd company to escape Section 24?

You can, but it is rarely a quick or cheap fix. Transferring property to a connected limited company triggers SDLT on the market value (residential rates including the 5% additional property surcharge from October 2024), CGT on any gain since purchase, and usually requires refinancing because residential BTL mortgages will not transfer to a limited company. Some landlords qualify for SDLT relief (Section 162 incorporation relief for CGT, partnership incorporation for SDLT) but the rules are tight - typically requiring an existing genuine partnership running the lettings business for at least 2-3 years. Incorporation only makes sense for portfolio landlords with significant gearing, ideally those planning to hold for 10+ more years.

UK Section 24 Landlord Calculator 2026/27

Section 24 of the Finance Act 2017 removed full mortgage interest relief for individual residential landlords - replaced by a flat 20% basic-rate tax credit. See exactly what that costs you each year versus the pre-2017 rules, with marginal-rate handling and the £100k Personal Allowance taper built in.

Worked scenarios for 2026/27

Basic-rate landlord (£20k other income)

+£0/year

Effective 12.0% on £10,000 profit - credit £800
Higher-rate, single BTL (£60k other income)

+£1,600/year

Effective 30.0% on £16,000 profit - credit £1,600
Higher-rate, geared portfolio (£70k income)

+£3,800/year

Effective 29.0% on £31,000 profit - credit £3,600
60% trap (£95k other + £20k rental)

+£2,000/year

Effective 48.9% on £18,000 profit - credit £1,000
Additional-rate landlord (£160k income)

+£3,000/year

Effective 35.8% on £26,000 profit - credit £2,400
Scottish HRT (42% above £43,662)

+£2,380/year

Effective 33.3% on £21,000 profit - credit £2,000

Cite or embed - free under CC BY 4.0

What is Section 24?

Section 24 of the Finance (No. 2) Act 2015, as amended by Finance Act 2017, is the legislative provision that progressively removed full income tax relief on mortgage interest and other finance costs for individual landlords of UK residential property. The rule is now codified at sections 272A-272B and 274A-274C of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005). HMRC’s technical guidance lives at PIM2054.

Before April 2017, residential landlords could deduct mortgage interest - along with repairs, agent fees, insurance, and other allowable expenses - from rental income to arrive at the taxable property profit. That profit was then taxed at the landlord’s marginal income tax rate (20%, 40%, or 45%). The effective relief on interest matched the marginal rate.

Section 24 phased this out over four tax years:

2017/18: 75% deduction, 25% as a 20% basic-rate credit
2018/19: 50% deduction, 50% as a 20% basic-rate credit
2019/20: 25% deduction, 75% as a 20% basic-rate credit
2020/21 onwards: 0% deduction, 100% as a 20% basic-rate credit

This calculator models the steady-state post-2020 rules across all supported tax years - the phase-in window is historical only.

How the post-2020 rules work

Under the current rules, the tax calculation for an individual residential landlord follows three steps:

Compute property profit gross of interest: rental income minus all allowable expenses EXCEPT mortgage / finance interest. This figure is added to your other taxable income (salary, self-employment, pensions) and Income Tax is charged at your marginal rate.
Calculate the basic-rate tax reducer: 20% of the LOWER of three numbers - (a) the mortgage interest paid in the year, (b) the property profit gross of interest, (c) your total income chargeable to Income Tax that exceeds the Personal Allowance.
Subtract the tax reducer from the Income Tax liability computed in step 1. Excess interest that cannot be relieved this year (because of the cap in step 2) is carried forward indefinitely against future property profits.

The arithmetic is deceptively simple, but the effect on cash flow and investment yield is dramatic for any landlord above the basic-rate threshold.

Worked example: higher-rate landlord, single property

A landlord with £60,000 employment salary owns a single buy-to-let generating £18,000 of annual rent. Expenses (insurance, agent, repairs) come to £2,000. Mortgage interest is £8,000.

Pre-2017 rules:

Property profit = £18,000 - £2,000 - £8,000 = £8,000
Added to £60,000 salary = £68,000 total taxable
Tax on the £8,000 property slice at the higher rate: £8,000 × 40% = £3,200

Post-2020 rules (Section 24):

Property profit (no interest deduction) = £18,000 - £2,000 = £16,000
Added to £60,000 salary = £76,000 total taxable
Tax on £16,000 slice at 40% = £6,400
Basic-rate credit: £8,000 × 20% = £1,600
Net Income Tax on property = £6,400 - £1,600 = £4,800

The landlord pays £1,600 more per year under Section 24 - exactly 20% of the £8,000 interest, the gap between the 40% rate they would have got under deduction and the 20% credit they actually get. This same pattern holds for every £100 of interest: a 40% taxpayer pays £20 more, a 45% taxpayer pays £25 more, a basic-rate (20%) taxpayer pays nothing extra.

Worked example: additional-rate landlord with portfolio

A consultant earning £160,000 owns three buy-to-let flats. Combined rental income is £72,000, expenses £10,000, mortgage interest £40,000.

Pre-2017:

Property profit = £72,000 - £10,000 - £40,000 = £22,000
Already at additional-rate band: £22,000 × 45% = £9,900 of tax

Post-2020:

Property profit = £72,000 - £10,000 = £62,000
Tax at 45% = £27,900
Basic-rate credit: £40,000 × 20% = £8,000
Net property tax = £27,900 - £8,000 = £19,900

Annual Section 24 cost: £10,000 - exactly 25% of the £40,000 interest. For a portfolio this size, the difference compounds into a six-figure tax hit over a ten-year holding period.

The £100k tax trap interaction

Because Section 24 forces rental profit to flow through gross of interest, it pushes more landlords into the £100,000-£125,140 Personal Allowance taper - where each £1 of additional income costs 60p of tax.

Consider a £90,000 salary landlord with a single BTL generating £20,000 of rent, £3,000 expenses, £6,000 interest:

Pre-2017: Property profit £11,000. Total taxable = £101,000 - barely into the taper at all (£1,000 in the 60% zone).
Post-2020: Property profit £17,000. Total taxable = £107,000 - now £7,000 in the 60% zone, with the 20% credit only partially offsetting.

The same cash flow, the same property, the same tenant - but the tax bill jumps significantly because the PA taper now bites a much wider band of income. This is one of the most under-recognised consequences of Section 24 and a key reason landlords near the £100k threshold scrutinise pension contributions, salary sacrifice, and EIS investments more aggressively after 2017.

Companies still get full relief

The single most consequential carve-out: Section 24 applies only to individuals. Limited companies (typically SPVs - Special Purpose Vehicles set up to hold buy-to-let portfolios) continue to deduct mortgage interest in full as an ordinary business expense. The post-tax profit is then liable to Corporation Tax (19% to 25% depending on profit band) rather than Income Tax (up to 45% / 48% in Scotland).

For our portfolio example above - £62,000 of pre-interest profit, £40,000 of interest - a Ltd company would compute:

Trading profit = £62,000 - £40,000 = £22,000
Corporation Tax at 25% (over the £50k small profits limit threshold with associated companies) = £5,500

Versus the individual’s £19,900 of Income Tax on the same numbers. That £14,400 annual gap drives the post-2017 incorporation wave - though, critically, incorporation triggers SDLT at residential rates (plus the 5% additional dwellings surcharge from October 2024), CGT on the gain since purchase, refinancing costs, and ongoing company administration costs. The break-even horizon is typically 5-10 years; landlords planning to sell within 3-5 years usually find incorporation a net loss.

What “finance costs” means

The restriction applies to a broader category than just mortgage interest. HMRC’s PIM2054 lists the following as restricted finance costs:

Interest on mortgages, loans, and overdrafts taken out to buy or improve the property
Interest on loans to fund repairs to the property
Loan arrangement fees and broker fees
Discount, premium, and disguised interest
Alternative finance arrangements (e.g. Sharia-compliant financing) where the substance is interest

What is NOT restricted - and remains fully deductible:

Repairs and maintenance (not improvements)
Insurance
Council tax and utilities for void periods or HMO common areas
Letting agent and management fees
Accountancy fees for the property business
Ground rent, service charges, professional fees, and bad debts

Furnished Holiday Lets - the carve-out that ended in 2025

Until 5 April 2025, Furnished Holiday Lets (FHLs) were treated as a trade rather than a property business and were specifically exempt from Section 24. That meant FHL landlords could deduct mortgage interest in full, claim capital allowances on furnishings, and get the 10% Business Asset Disposal Relief rate on disposal.

The Spring Budget 2024 (and Finance Act 2024) abolished the FHL regime from 6 April 2025. From the 2025/26 tax year, properties that previously qualified as FHLs are taxed under the standard property income rules - meaning Section 24 now applies to former FHLs, capital allowances revert to the standard property regime, and disposals lose the BADR preference. The transition has caught many landlords by surprise; if you ran an FHL prior to April 2025, you almost certainly have a larger tax bill from 2025/26 onwards regardless of any structural changes you make.

What this calculator does

Inputs you provide:

Annual rental income - gross rent received from tenants for the year.
Allowable expenses - everything EXCEPT mortgage / finance interest (repairs, agent, insurance, etc.).
Mortgage interest - the finance cost subject to Section 24 restriction.
Other income - salary, self-employment profit, pensions in payment, any other income that determines which marginal band your rental profit falls into.
Region and tax year - England / Wales / NI vs Scotland (Scottish Income Tax bands have higher higher-rate and advanced-rate rates).

What the calculator returns:

Pre-S24 tax: what your total Income Tax bill WOULD HAVE BEEN under the pre-2017 rules with mortgage interest fully deductible.
Post-S24 tax: your actual current liability under the 20% basic-rate-credit regime.
Delta: the extra tax you pay each year because of Section 24 - positive numbers mean you pay more under the new rules.
Effective landlord rate: the proportion of your rental profit (before interest) that goes to Income Tax. The benchmark figure when comparing buy-to-let net yields against alternative investments.

See our methodology for sources, testing approach, and the legislative reference index.

UK Landlord Tax Guide - the full landlord tax stack including SDLT, CGT, and registration obligations.
FHL Abolition Guide - the April 2025 changes to Furnished Holiday Lets.
60% Tax Trap - how rental profit interacts with the £100k Personal Allowance taper.
Corporation Tax Calculator - what an SPV holding your portfolio would pay instead.

Frequently asked questions

What is Section 24 of the Finance (No. 2) Act 2015?: Section 24 is the legislative provision that progressively withdrew full income tax relief on mortgage interest for individual residential landlords. The phase-in ran from 6 April 2017 to 6 April 2020. From the 2020/21 tax year onwards individuals get no deduction for finance costs against rental income at all - instead, a flat 20% basic-rate tax reducer is applied against the income tax liability. The corresponding statutory wording sits at ITTOIA 2005 sections 272A-272B and 274A-274C (inserted by Finance (No. 2) Act 2015 and amended by Finance Act 2017).
Why does Section 24 hurt higher-rate landlords?: Pre-2017, a 40% taxpayer paying £10,000 of mortgage interest got £4,000 of tax relief - the interest reduced rental profit which was then taxed at 40%. Under Section 24 the relief is capped at 20% (£2,000) no matter the landlord's marginal rate. That same £10,000 of interest now costs a 40% taxpayer £2,000 more per year, and a 45% taxpayer £2,500 more. For highly geared portfolios, the post-S24 tax bill can exceed the pre-tax rental profit, producing a loss on paper while cash flow stays positive.
Does Section 24 apply to limited companies?: No. Section 24 only restricts relief for individuals (sole / joint owners) of residential property. Limited companies (SPVs holding buy-to-let portfolios) continue to deduct mortgage interest in full as a normal business expense, computing Corporation Tax on the post-interest profit. This is the principal structural reason for the post-2017 wave of portfolio incorporations - higher-rate landlords often save tax by transferring properties to a Ltd company, though the SDLT, CGT, and refinancing costs of incorporation usually require a 5-10 year horizon to break even.
How is the 20% tax credit capped?: The basic-rate credit is the LOWER of three numbers: (a) the mortgage interest paid in the year, (b) the property business profits for the year (i.e. rental income minus all other allowable expenses), and (c) total income chargeable to income tax that exceeds the personal allowance. Excess interest above the cap can be carried forward indefinitely against future years - but if your property profits are persistently lower than your interest costs, the carry-forward never gets fully utilised in practice.
Are Furnished Holiday Lets affected by Section 24?: Until 5 April 2025, FHLs were specifically exempt from Section 24 - landlords could deduct interest in full as if running a trade. The FHL regime was abolished from 6 April 2025 (announced Spring Budget 2024, legislated in Finance Act 2024). From 2025/26 onwards, properties that previously qualified as FHLs now fall under the standard property income rules - meaning Section 24's interest restriction applies, capital allowances on furnishings are no longer available, and gains on disposal lose the 10% Business Asset Disposal Relief rate. See our FHL abolition guide for the full impact list.
Does Section 24 apply to commercial property landlords?: No. Section 24 restricts relief only on finance costs incurred for residential let property held by individuals. Commercial property (offices, warehouses, retail units, mixed-use property where the residential element is incidental) is unaffected - mortgage interest remains a fully deductible expense against commercial rental profit. Mixed-use properties (e.g. a shop with a flat above) require apportionment of finance costs between residential and commercial elements.
How does Section 24 interact with the £100k personal allowance taper?: Under post-S24 rules, mortgage interest no longer reduces taxable income - rental profits flow through gross. That pushes more landlords into the £100,000 to £125,140 personal allowance taper, where each £1 of additional income costs 60p in tax (the basic-rate credit on interest is calculated separately and only partially offsets this). A £75,000-salary landlord with £15,000 of net rental income (after interest) had pre-S24 taxable income of £90,000 - all in the 40% band. Post-S24, if interest was £8,000, taxable income is £98,000 - still under the taper, but only just. A larger portfolio can easily tip the same landlord into the 60% zone with no real change in cash flow.
Can I just put properties into a Ltd company to escape Section 24?: You can, but it is rarely a quick or cheap fix. Transferring property to a connected limited company triggers SDLT on the market value (residential rates including the 5% additional property surcharge from October 2024), CGT on any gain since purchase, and usually requires refinancing because residential BTL mortgages will not transfer to a limited company. Some landlords qualify for SDLT relief (Section 162 incorporation relief for CGT, partnership incorporation for SDLT) but the rules are tight - typically requiring an existing genuine partnership running the lettings business for at least 2-3 years. Incorporation only makes sense for portfolio landlords with significant gearing, ideally those planning to hold for 10+ more years.

Other UK tax calculators that pair with the Section 24.