Section 24 Mortgage Tax Relief UK 2026, Landlord Guide

What is Section 24?

Section 24 of the Finance (No. 2) Act 2015 restricts the tax relief landlords can claim on finance costs, principally mortgage interest. Before April 2017, landlords could deduct mortgage interest from rental income before calculating their tax liability
Since April 2020, the full restriction is in force: landlords receive a tax credit worth 20% of their finance costs rather than deducting the costs from income. Higher-rate (40%) and additional-rate (45%) taxpaying landlords lose half or more of the relief they previously received
The restriction applies to all residential property lettings by individuals (not limited companies). It covers mortgage interest, loan arrangement fees, and other finance costs incurred to acquire or improve the property
Effect on higher-rate taxpayers: a landlord paying 40% income tax who previously deducted �10,000 of mortgage interest saved �4,000 in tax. Under Section 24, the same landlord receives a �2,000 credit, a �2,000 increase in annual tax
Fully in force since the 2020/21 tax year, the phased transition is complete and no further changes to the restriction itself are expected

Portfolio viability: for highly leveraged landlords in higher tax brackets, Section 24 can turn nominally profitable lettings into after-tax losses. If your gross rental yield is close to your mortgage rate, Section 24 may eliminate profit entirely at higher tax rates
Pushed into higher bands: Section 24 adds finance costs back to your taxable income, this can push you into a higher tax band, increasing your marginal rate and compounding the restriction's effect
Child benefit charge: higher taxable income can trigger or increase the High Income Child Benefit Charge for landlords with children. Finance costs added back to income count toward the �60,000 threshold (tapered between �60,000 and �80,000)
Personal allowance tapering: the restriction can push income above �100,000, causing gradual loss of the personal allowance (�1 lost for every �2 of income over �100,000), creating effective marginal rates of 60%
Self-assessment: all landlords affected by Section 24 must complete a Self Assessment tax return and calculate the restriction using HMRC's property income helpsheet (SA105)

The Section 24 restriction applies only to individuals, limited companies can deduct mortgage interest as a business expense in full, subject to corporation tax rules
Corporation tax rate (2026): 25% for profits above �250,000; 19% for profits below �50,000; marginal relief between these thresholds. For most landlords, this is substantially lower than the 40%/45% rate on personal income
Incorporation costs: transferring personally-held properties to a company triggers Stamp Duty Land Tax (SDLT), Capital Gains Tax, and legal costs. For most landlords with existing portfolios, the transfer costs outweigh the tax benefits unless the portfolio is large
For new portfolios: landlords starting a new portfolio or buying additional properties may find it more tax-efficient to purchase through a company from the outset, avoiding the SDLT and CGT transfer costs
Mortgage availability: buy-to-let mortgages for limited companies typically carry higher rates and arrangement fees. The gap has narrowed since 2020 but company mortgages may still be more expensive, factor this into your comparison

Spouse or partner joint ownership: if your partner is a basic-rate taxpayer, transferring a share of the property to them allocates rental income at their lower rate. The 20% tax credit applies to the full finance costs regardless, but income tax is charged at the partner's lower rate
Pension contributions: increasing pension contributions reduces your adjusted net income, potentially keeping you below higher-rate thresholds or the �100,000 personal allowance reduction point
Reducing leverage: overpaying mortgages reduces finance costs and therefore Section 24 exposure. A debt-free property is entirely outside Section 24
Portfolio restructuring: selling low-yield, highly-leveraged properties and reinvesting in lower-leverage or higher-yield assets can restore profitability, factor CGT on disposal into your calculations
Specialist advice: Section 24 interacts with income tax bands, National Insurance, CGT, SDLT, and inheritance tax in complex ways. A specialist property accountant can model incorporation, joint ownership, and portfolio restructuring options for your specific circumstances