Section 24 Mortgage Interest Tax Relief: Complete UK Landlord Guide 2026

Section 24 — formally called the mortgage interest restriction — is one of the most significant tax changes for UK buy-to-let landlords in the last decade. It limits how much mortgage interest you can deduct from your rental income, often resulting in significantly higher tax bills for higher-rate taxpayers.

If you own buy-to-let property with a mortgage, understanding how Section 24 works is essential for accurate tax planning and Self Assessment reporting.

What is Section 24?

Section 24 (introduced in Finance Act 2015, fully implemented by April 2020) changed how mortgage interest on buy-to-let properties is treated for tax purposes.

Before Section 24: Landlords could deduct mortgage interest as an expense before calculating taxable profit. If you were a 40% taxpayer, every £1 of mortgage interest saved you 40p in tax.

After Section 24: Mortgage interest is no longer deductible as an expense. Instead, you receive a 20% tax credit on the interest paid, applied after your tax bill is calculated.

This means higher-rate and additional-rate taxpayers now effectively pay more tax on the same rental income because they can only claim 20% relief instead of 40% or 45%.

How Section 24 mortgage interest relief works

The calculation happens in two stages:

The same landlord with the same income now pays £2,400 more in tax purely because of how mortgage interest relief is calculated.

Who is affected by Section 24?

Section 24 applies to individual landlords who own residential buy-to-let properties in their personal name and have a mortgage on those properties.

• +Higher-rate taxpayers (40%): Significantly worse off. The 20% relief is half what they previously claimed.
• +Additional-rate taxpayers (45%): Even worse off. The gap between their marginal rate and the 20% credit is larger.
• +Basic-rate taxpayers (20%): Largely unaffected because the 20% credit matches their tax rate.

Section 24 also has an indirect effect: by increasing your taxable rental profit, it can push you into a higher tax band. Some landlords who were previously basic-rate taxpayers are now higher-rate because their rental income (without the mortgage interest deduction) tips them over the £50,270 threshold.

What is not affected by Section 24

• +Limited company landlords: Properties owned by a limited company are not subject to Section 24. Mortgage interest remains fully deductible as a business expense. This is one reason many landlords have moved properties into limited companies.
• +Furnished Holiday Lets (FHL): FHL properties are treated as a trade, not property income, so Section 24 does not apply. Mortgage interest is still fully deductible.
• +Commercial property landlords: Section 24 only applies to residential property. Commercial property mortgage interest is still fully deductible.

What counts as mortgage interest for Section 24?

Section 24 applies to finance costs on buy-to-let properties. This includes:

• +Interest on a buy-to-let mortgage
• +Interest on loans used to purchase or improve rental property
• +Interest on loans used to buy furnishings or equipment for the rental property
• +Arrangement fees on mortgages or loans for rental property

Does not include:

• −Mortgage capital repayments (only interest counts)
• −Early repayment charges (these remain fully deductible as expenses)
• −Buildings insurance or other non-finance property costs

How to report Section 24 mortgage interest on Self Assessment

Mortgage interest is reported separately from your other property expenses on the Self Assessment return.

1. Complete the UK Property pages (SA105): Report your rental income and all allowable expenses (letting agent fees, repairs, insurance, ground rent) as normal in the expenses section.
2. Residential Finance Costs section: In the separate "Residential Finance Costs" box, enter the total mortgage interest and finance costs paid during the tax year.
3. HMRC calculates the credit: HMRC automatically calculates the 20% tax credit and applies it to your tax bill after all other tax is calculated.

Important: Do not include mortgage interest in your property expenses. It is reported separately. If you accidentally include it in both places, your tax calculation will be wrong.

Tracking mortgage interest correctly

Your mortgage lender will send you an annual statement showing how much interest you paid during the tax year (6 April to 5 April). This is the figure you report on your Self Assessment return.

If your lender's statement covers a calendar year instead of the tax year, you will need to calculate the interest paid between 6 April and 5 April manually. Most online mortgage accounts allow you to download monthly statements and add up the interest charges yourself.

Can I avoid Section 24 by remortgaging or refinancing?

No. Section 24 applies to all mortgage interest on buy-to-let properties owned by individuals, regardless of when the mortgage was taken out or refinanced. Remortgaging does not change how the interest is treated for tax purposes.

The only ways to avoid Section 24 are:

• +Transfer the property into a limited company (involves SDLT and legal costs)
• +Operate the property as a Furnished Holiday Let (strict occupancy criteria apply)
• +Pay off the mortgage entirely (removes the finance cost, but requires significant capital)

Should I move my rental property into a limited company?

Many landlords have moved their properties into limited companies to avoid Section 24. In a limited company, mortgage interest is fully deductible as a business expense, and profits are subject to Corporation Tax (19% in 2026) instead of Income Tax.

Advantages:

• +Full mortgage interest deduction
• +Corporation Tax (19%) instead of higher-rate Income Tax (40%+)
• +Easier to pass property to family members or business partners

Disadvantages:

• −Stamp Duty Land Tax (SDLT) on the transfer (same as buying the property again)
• −Capital Gains Tax (CGT) on the transfer if the property has increased in value
• −Higher mortgage rates for limited company buy-to-let mortgages
• −Additional admin: annual accounts, Corporation Tax return, confirmation statement

Whether it is worth moving to a limited company depends on your tax rate, the number of properties you own, how long you plan to hold them, and whether you need to extract profits regularly. Speak to an accountant before making this decision.

Other allowable landlord expenses (not affected by Section 24)

Section 24 only applies to mortgage interest and finance costs. All other allowable landlord expenses are still fully deductible before calculating tax:

• +Letting agent fees and management charges
• +Repairs and maintenance (not improvements)
• +Buildings and contents insurance
• +Utility bills when the property is void
• +Ground rent and service charges
• +Council Tax when the property is void
• +Accountancy fees
• +Legal fees for letting (not for purchasing)

For a full breakdown of allowable landlord expenses, see our complete guide to UK landlord allowable expenses.

Common Section 24 mistakes to avoid

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  Reporting mortgage capital repayments as interest

  Only the interest portion of your mortgage payment qualifies for Section 24 relief. Capital repayments are not deductible and do not qualify for the 20% credit.

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  Including mortgage interest in property expenses

  Mortgage interest must be reported in the Residential Finance Costs section, not in the expenses box. Putting it in both places will double-count it and create an incorrect tax calculation.

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  Using calendar-year figures instead of tax-year figures

  Self Assessment runs 6 April to 5 April. If your lender's statement covers a calendar year (January to December), you need to calculate the interest paid during the tax year specifically.

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  Forgetting about the 20% credit when planning cash flow

  The 20% credit reduces your tax bill, but it is applied after the tax is calculated. Make sure you account for the full tax liability when planning payments on account.

Frequently Asked Questions