What the guidance used to say
For years, HMRC's Business Income Manual included an example where a landlord remortgaged, withdrew capital they had originally put into the letting business, and spent it privately. The interest was allowed. Many landlords and advisers relied on that example.
What changed in July 2026
On 1 July 2026, HMRC updated its manual pages on funding a business (BIM45690) and withdrawing capital (BIM45700). The updated examples suggest that where new borrowing funds a private withdrawal, the interest may fail the "wholly and exclusively" test, even if your capital account is still in credit. Tax commentators have said the new examples are not wholly consistent, and the legislation itself hasn't changed. HMRC's manuals are guidance, not law, but they show how HMRC is likely to approach an enquiry.
What is still clearly allowed
- Interest on a mortgage used to buy the rental property.
- Interest on borrowing used to repair, improve or buy other rental property.
- Interest on a mortgage you already had on a former home when you start letting it.
These all get the Section 24 credit: 20% now, 24% from 2027/28.
Where the risk is now
Releasing equity from a buy-to-let to fund a new home, a car or other personal spending. If you've already done this and claimed the interest, or plan to, ask an accountant or tax adviser to review your capital account and the July 2026 guidance before you file.
Frequently asked questions
Is remortgage interest on a buy-to-let tax deductible?
If the money is used for the letting business, the interest qualifies for the Section 24 credit. If it's used privately, HMRC's July 2026 guidance means relief may be refused, so take advice.
Sources
- HMRC Business Income Manual BIM45700: withdrawal of capital (updated 1 July 2026)
- GOV.UK: Work out your rental income when you let property
- GOV.UK: Tax relief for residential landlords, how it's worked out
Sources last checked 9 November 2026. See all our sources and how we keep pages up to date.