Section 24 of the Finance Act 2015 removes mortgage interest as a deductible expense for individual landlords. Instead of deducting the full interest, landlords now receive a 20% tax credit — meaning higher-rate taxpayers pay significantly more tax.

Does Section 24 affect limited companies?

No. Limited companies can still deduct mortgage interest as a business expense before calculating Corporation Tax. This is the main reason many landlords have incorporated since 2017.

How does Section 24 affect higher-rate taxpayers?

Higher-rate (40%) taxpayers are most affected. They previously received 40% relief on mortgage interest; now they only receive a 20% credit. On a heavily mortgaged portfolio, this can turn a profitable property into a loss after tax.

Section 24 Tax Guide for Landlords 2026

Updated March 2026 · 9 min read

Section 24 of the Finance Act 2015 is arguably the most consequential change to buy-to-let taxation in a generation. Fully implemented since April 2020, it removes the ability for individual landlords to deduct mortgage interest from rental income before calculating their tax bill. The result: higher-rate taxpayers can no longer write off their biggest cost, dramatically increasing effective tax rates on leveraged portfolios.

What Section 24 Changed

Before April 2017, landlords could deduct mortgage interest directly from rental income. If your rent was £12,000/year and your mortgage interest was £7,000/year, you were taxed on £5,000 of profit — simple and straightforward.

Under Section 24, that deduction is gone. Instead, landlords receive a 20% tax credit on mortgage interest, regardless of their marginal tax rate. For basic-rate (20%) taxpayers, the outcome is roughly the same. For higher-rate (40%) and additional-rate (45%) taxpayers, the impact is severe.

How It Works in Practice

Take a landlord with one property generating £15,000/year in rent, with £9,000/year in mortgage interest:

	Before S24 (old rules)	Under S24 (2026)
Gross rental income	£15,000	£15,000
Other costs (insurance, maintenance, etc.)	−£2,500	−£2,500
Mortgage interest deduction	−£9,000	Not allowed
Taxable profit	£3,500	£12,500
Tax at 40% (higher rate)	£1,400	£5,000
20% tax credit on mortgage interest	—	−£1,800
Net tax bill	£1,400	£3,200

The same property, the same rent, the same mortgage — but the tax bill has more than doubled for a higher-rate taxpayer. In some cases, landlords find they are paying tax on a property that generates no real profit or even makes a cash loss.

Who Is Most Affected?

Section 24 hits hardest if you are:

A higher-rate or additional-rate taxpayer — the 20% credit only partially offsets your tax liability at 40% or 45%
Highly leveraged — large mortgages mean large interest payments, amplifying the impact
Operating as an individual rather than through a limited company (companies are unaffected)
Running a large portfolio — the effect compounds across multiple properties

Basic-rate taxpayers are broadly unaffected in terms of the final tax bill (though the mechanics change). However, there is a hidden trap: because Section 24 inflates your taxable income, it can push basic-rate taxpayers into the higher-rate band, affecting other reliefs and allowances.

The Taxable Income Trap

Section 24 requires you to declare the full rental income — not profit — as taxable income before applying the credit. This has knock-on effects:

It can push you over the £100,000 threshold where personal allowance tapers away, creating an effective 60% marginal rate
It reduces eligibility for child benefit (clawed back above £60,000 income)
It affects student loan repayments based on income rather than profit
It may trigger additional tax filings and accountancy costs

Options and Workarounds

1. Transfer to a Limited Company

The most widely used response to Section 24 is buying new properties through a limited company. Companies pay corporation tax (currently 25% for profits above £250,000, 19% for profits under £50,000) and can still deduct mortgage interest in full. This makes the effective tax rate on rental profits significantly lower for higher-rate taxpayers.

However, transferring existing personally-owned properties into a company triggers Stamp Duty Land Tax and Capital Gains Tax as if you had sold at market value — expensive for established portfolios. Most landlords keep existing properties in their personal name and use a company for future acquisitions only.

2. Remortgage to Reduce Mortgage Interest

Reducing your mortgage balance through overpayments or using a lower LTV reduces the interest payment that Section 24 no longer allows you to deduct. If you can afford to pay down debt, this improves your net position.

3. Increase Rents

Higher rent improves gross yield and net income, partially offsetting the tax impact. However, rents are constrained by the local market and tenant affordability — you cannot simply raise rents to cover an increased tax bill without risking voids.

4. Sell Lower-Yield Properties

Section 24 changes the economics of leveraged low-yield properties fundamentally. Properties that broke even or made small profits under the old rules may now generate tax bills that create real losses. Selling these and redeploying capital into higher-yielding properties or paying off debt on better-performing ones is a rational response.

5. Spouse Income Splitting

If your spouse or civil partner is a basic-rate taxpayer, transferring a share of property ownership to them can split the rental income and reduce the average tax rate. This requires actual legal ownership changes and careful planning to avoid HMRC's income-splitting rules.

What Has Not Changed

Section 24 only affects mortgage interest. All other costs remain fully deductible from rental income for individual landlords: letting agent fees, maintenance, insurance, ground rent, service charges, accountancy, gas safety and compliance costs, and property management fees.

Getting Professional Advice

Section 24 interacts with your total income, your portfolio structure, your mortgage situation, and your long-term plans. The right response depends heavily on your specific circumstances. A specialist property tax accountant can model the options and identify the most tax-efficient approach for your portfolio.

What Landlords Are Saying

Section 24 has generated significant debate across UK landlord forums. These are real accounts from landlords describing its practical impact:

"Section 24 has destroyed my ability to rent my properties. I cannot earn enough rent to cover my mortgages, service charges and expenses without the tax relief."
— Landlord, Property118 forum

"My income, plus the 'theoretical' income my rentals generate, push me too close to the 40% income tax bracket for comfort. The current regime is actively discouraging people like me from earning more."
— Charlotte Goodwin, landlord, Property118

"One of the main reasons rents are so expensive is Section 24 Tax, which is hurting tenants. The government brought in this anti-landlord measure to get votes and collect more tax, and now we're seeing the consequences: a housing shortage and higher rents for tenants."
— Mick Roberts, Nottingham landlord, Property118

The data backs this up: an estimated 290,000 homes have left the private rented sector since Section 24 was introduced, driven by landlords selling properties that are no longer viable after the tax change. (Source: Property118/NRLA research, 2025.)

Key Takeaways

Section 24 replaces full mortgage interest deduction with a 20% tax credit for individual landlords
Higher-rate taxpayers face dramatically increased tax bills on leveraged properties
Limited companies are unaffected and can still deduct mortgage interest in full
Transferring existing properties to a company triggers SDLT and CGT — usually only viable for new purchases
The full rental income (not profit) is declared, which can push landlords into higher tax bands and affect other reliefs