How it works
You pay tax on your rental profit before interest, then HMRC reduces your tax bill by 20% of the interest (24% from 2027/28). For a basic-rate taxpayer that's about the same as a deduction. For a higher-rate taxpayer it's worth much less.
| £10,000 profit before £6,000 interest | Basic rate | Higher rate |
|---|---|---|
| Tax on £10,000 (2026/27) | £2,000 | £4,000 |
| Less 20% credit on £6,000 | −£1,200 | −£1,200 |
| Tax to pay | £800 | £2,800 |
| If interest were deductible | £800 | £1,600 |
What counts as finance costs
- Interest on the mortgage used to buy the rental.
- Arrangement and broker fees for that mortgage.
- Interest on loans for furnishing or improving the let.
Remortgaging to release equity for personal use is now riskier after HMRC's July 2026 guidance change. See remortgage interest.
Where to report it
On the UK property pages of your Self Assessment return, residential finance costs go in their own box, not with your expenses. Our free spreadsheet keeps them separate for you.
Frequently asked questions
Can I deduct mortgage interest on a buy-to-let?
Not as an expense if you own it personally. You get a basic-rate tax credit instead, 20% now and 24% from April 2027.
Are mortgage capital repayments tax deductible?
No. Only the interest and finance fees qualify for relief.
Sources
- GOV.UK: Tax relief for residential landlords, how it's worked out
- GOV.UK: Work out your rental income when you let property
Sources last checked 10 November 2026. See all our sources and how we keep pages up to date.