Figures: 2026/27 tax year. Reviewed by Noman Abbasi, ACCA.
Section 24 is the rule that stops individual landlords deducting mortgage interest and other finance costs from their rental profit. It was phased in between 2017 and 2020 and now applies in full. Instead of a deduction, you get a basic-rate tax reduction worth 20% of your finance costs. This calculator shows your income tax under Section 24, the tax you would have paid under the old full-relief rules, and the difference, which is what the restriction actually costs you.
How does Section 24 work?
Under Section 24 your taxable rental profit is worked out before deducting any mortgage interest. You are taxed on that higher profit at your marginal rate, and then your final bill is cut by a Section 24 tax reduction.
The reduction is 20% of the lowest of three figures: your finance costs, your rental profit (after other expenses), and your adjusted total income (broadly, your income above the personal allowance). Because it is a reduction to your tax bill rather than a deduction from your income, it cannot take your tax below zero and it cannot create a refund. Any part you cannot use in the year is carried forward.
Why higher-rate landlords lose out
If you pay tax at 40% or 45%, your finance costs are only relieved at 20%, not at your marginal rate. That 20-point gap is the extra tax Section 24 creates. A landlord who only pays basic-rate (20%) tax is generally unaffected, because 20% relief is the same as a 20% deduction would have been. The restriction can also push a landlord into the higher-rate band, or reduce the personal allowance, because the finance costs are added back to income first.
Worked example
Say you earn £60,000 from your job, receive £20,000 in rent, have £2,000 of non-finance expenses and pay £8,000 of mortgage interest. Your rental profit for tax is £18,000 (rent less the £2,000, with no deduction for interest), so your total income is £78,000. The Section 24 reduction is 20% of £8,000, which is £1,600. Under the old rules you would have deducted the full £8,000 and saved tax at 40%, worth £3,200. The difference, £1,600, is what Section 24 costs you this year.
Can a limited company avoid Section 24?
A limited company is not caught by Section 24: it deducts mortgage interest in full against its rental profit before Corporation Tax. That is why many portfolio landlords look at incorporating. It is not automatically worth it, though, because transferring property into a company can trigger Capital Gains Tax and Stamp Duty. Weigh it up with our should I incorporate my property portfolio calculator, and read the wider picture on our accountants for landlords page.
Who is this for?
Mortgaged individual and joint landlords who want to see the real cost of the finance-cost restriction. It is a per-year estimate using England, Wales and Northern Ireland tax bands, for residential property, and it is not personal tax advice. If you would like a person to run your actual numbers and plan around them, our landlord accountants can help, book a free call.
Frequently asked questions
What is Section 24 for landlords?
Section 24 is the UK rule that stops individual landlords deducting mortgage interest and other finance costs from their rental profit. Since April 2020 you instead receive a basic-rate tax reduction worth 20% of your finance costs, rather than a full deduction at your marginal rate.
How is the Section 24 tax reduction calculated?
The reduction is 20% of the lowest of three figures: your finance costs, your rental profit after other expenses, and your adjusted total income (income above the personal allowance). It reduces your tax bill directly, cannot take it below zero, and cannot create a refund, any unused amount is carried forward.
Does Section 24 affect basic-rate taxpayer landlords?
Generally no. If all your income is taxed at the basic rate, a 20% tax reduction gives the same result as a 20% deduction would have, so Section 24 usually costs you nothing. However, adding the finance costs back to your income can sometimes tip you into the higher-rate band or reduce your personal allowance.
Does putting my properties in a limited company avoid Section 24?
A limited company is not subject to Section 24 and can deduct mortgage interest in full before Corporation Tax. But transferring property into a company can trigger Capital Gains Tax and Stamp Duty, so it is not automatically worthwhile. Model both positions before deciding.