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 Stamp Duty Land Tax (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 Capital Gains Tax (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.

£60,000 Rental Income: UK Section 24 Tax 2026/27

Landlord earning £60,000 of annual rent? Section 24 of the Finance Act 2017 means a higher-rate landlord pays roughly £7,360 more in Income Tax each year than the pre-2017 rules would have produced, at typical gearing. A basic-rate landlord with the same rent sees a delta near £4,506 - Section 24 only bites once you cross into the higher-rate band. Verified against gov.uk Section 24 case studies and HMRC PIM2054.

HRT, medium gearing

+£7,360

Section 24 cost vs pre-2017 - effective 35.8%

Basic-rate landlord

+£4,506

Effective 19.4% - Section 24 neutral

HRT net cash flow

£9,920

After expenses, interest, and post-S24 tax

How the calculation works on £60,000 of rent

Start with rental income: £60,000.
Deduct allowable expenses (estimated at 12% of rent for agent fees, insurance, repairs): £7,200.
The result, £52,800, is the property profit BEFORE interest. Under pre-2017 rules you would then subtract interest; under Section 24 you cannot.
Add the property profit to your other taxable income and apply Income Tax at your marginal rate.
Apply the 20% basic-rate credit against your Income Tax liability - capped at the lower of interest paid, property profit, or income above the Personal Allowance.
The delta between pre-2017 and current rules is what Section 24 actually costs you each year.

All 9 scenarios at £60,000 rent

Section 24 cost, effective tax rate, and net cash flow across three gearing levels and three marginal-rate tiers. Allowable expenses assumed at 12% of rent. Adjust the values interactively on the main calculator.

Taxpayer	Gearing	Interest	Pre-S24 tax	Post-S24 tax	Delta	Effective
20%	20%	£12,000	£11,752	£14,152	+£2,400	24.0%
20%	40%	£24,000	£7,246	£11,752	+£4,506	19.4%
20%	60%	£36,000	£4,846	£9,352	+£4,506	14.9%
40%	20%	£12,000	£27,912	£32,712	+£4,800	40.3%
40%	40%	£24,000	£22,952	£30,312	+£7,360	35.8%
40%	60%	£36,000	£18,152	£27,912	+£9,760	31.2%
45%	20%	£12,000	£76,563	£79,563	+£3,000	40.5%
45%	40%	£24,000	£71,163	£77,163	+£6,000	35.9%
45%	60%	£36,000	£65,763	£74,763	+£9,000	31.4%

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Related calculators

Section 24 calculator - tune rental, expenses, interest, and other income for your real numbers.
UK landlord tax guide - the full landlord tax stack including SDLT, CGT, and registration.
FHL abolition guide - what changed when Furnished Holiday Lets lost their carve-out from April 2025.
Corporation Tax calculator - what an SPV holding the same property would pay instead.
60% tax trap - how rental profit interacts with the £100k Personal Allowance taper.

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 Stamp Duty Land Tax (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 Capital Gains Tax (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.