What Section 24 did
Until April 2017, landlords deducted mortgage interest from rent like any other cost. Section 24 of the Finance (No. 2) Act 2015 phased in a replacement over four years. Since 2020/21 you get a reduction in your tax bill equal to the basic rate times your finance costs.
Finance costs include mortgage interest, arrangement fees and interest on loans for furnishings. Capital repayments have never been deductible.
How the credit is calculated
The credit is the basic rate times the lowest of:
- finance costs for the year, plus unused costs brought forward;
- property profit for the year;
- adjusted total income above the Personal Allowance.
Anything not used carries forward.
Why higher-rate landlords pay more
Rent £20,000, expenses £2,000, interest £8,000:
| Basic rate (20%) | Higher rate (40%) | |
|---|---|---|
| Old rules: tax on £10,000 | £2,000 | £4,000 |
| Section 24: tax on £18,000 | £3,600 | £7,200 |
| Less 20% credit on £8,000 | −£1,600 | −£1,600 |
| Net tax | £2,000 | £5,600 |
The basic-rate landlord pays the same. The higher-rate landlord pays £1,600 more, which is 20% of the interest.
The threshold traps
- £50,270: profit above it is taxed at 40% now and 44% from April 2027.
- £60,000 to £80,000: the High Income Child Benefit Charge uses adjusted net income, which now includes the interest you can't deduct.
- £100,000 to £125,140: you lose £1 of Personal Allowance for every £2 of income, an effective rate of 60% or more. You can also lose tax-free childcare.
What changes in 2027/28
The credit follows the property basic rate, so it rises to 24%. The gap is 44% against 24% for higher-rate landlords and 49% against 24% for additional-rate landlords. Both are the same as today. Basic-rate landlords pay 24% and get 24% back, so the gap stays at zero. See your figures in the Section 24 calculator.
Frequently asked questions
Does Section 24 apply to limited companies?
No. Companies deduct interest in full against corporation tax.
Does Section 24 apply to commercial property?
No. It restricts finance costs on residential lettings only.
Sources
- GOV.UK: Tax relief for residential landlords, how it's worked out
- GOV.UK: High Income Child Benefit Charge
- GOV.UK: Income Tax rates and allowances, current and past
Sources last checked 9 November 2026. See all our sources and how we keep pages up to date.