landlord

Section 24 explained: how mortgage interest relief for landlords works now

Section 24 explained: landlords who let homes as individuals get a 20% tax reduction on finance costs, not a full deduction. How it works, with GOV.UK examples.

4 min read
Last reviewed 4 November 2026
By Your Property Check team

Part 1 of 7

What Section 24 means

General information, not advice. "Section 24" is the name landlords use for the restriction of tax relief on finance costs for residential property. GOV.UK describes it as restricting relief to the basic rate of Income Tax. It was phased in from 6 April 2017 and has been fully in place since 6 April 2020. Before it, an individual landlord deducted mortgage interest from rental income and paid tax on the profit. Now the interest is not deducted. Instead the landlord pays tax on the profit before interest and then receives a reduction in the tax bill.

Part 2 of 7

How the 20% reduction works

GOV.UK sets out the rule. The reduction is 20% of the lowest of three figures:

Finance costs that were not deducted from the rental income in the tax year, plus any brought forward from earlier years.
Property business profits, after using any losses brought forward.
Adjusted total income, which is income after losses and reliefs, excluding savings and dividends, that is above the personal allowance.

GOV.UK adds that the reduction cannot be used to create a tax refund. If the lowest figure is smaller than the finance costs, the difference is carried forward to later years. The case studies treat mortgage interest as a finance cost.

Part 3 of 7

The phase-in

Tax year	Share of finance costs deductible from rent	Share given as the 20% reduction
2017 to 2018	75%	25%
2018 to 2019	50%	50%
2019 to 2020	25%	75%
2020 to 2021 onwards	0%	100%

Part 4 of 7

Worked examples from GOV.UK

The GOV.UK case studies use 2020 to 2021 amounts with 2016 to 2017 tax rates throughout, so they show the mechanism, not today's tax bill. They apply to individual landlords whose only rental income is from residential property.

Example	Rental income	Mortgage or finance costs	The 20% reduction	Result
Sophia	£52,000	£20,000	£4,000 (20% of £20,000)	Tax £6,400 less £4,000 = £2,400, the same as before the restriction
John	£18,000, plus £35,000 self-employment	£8,000	£1,600 (20% of £8,000)	Tax £9,600 less £1,600 = £8,000, which is £1,600 more than before
Brian	£20,000, plus £36,000 salary	£15,000	£2,600 (20% of £13,000, his property profit)	Tax £8,800 less £2,600 = £6,200, with £2,000 of finance costs carried forward

John's case shows an extra cost: with total income of £51,000, GOV.UK's figures show his tax £1,600 higher than before the restriction. Sophia's figures show no change. Brian's reduction was capped by his profit, which is the "lowest of" rule in action. In the following year he used the carried-forward £2,000 together with £15,000 of new interest, for a reduction of £3,400. GOV.UK also notes that landlords whose income rises above £50,000 may face the High Income Child Benefit Charge.

Part 5 of 7

Who is affected

The GOV.UK examples cover individual landlords. Partnerships, trusts and people with income both as individuals and as partners or beneficiaries are pointed to HMRC's Property Manual. The GOV.UK page does not mention limited companies, so we say nothing about them here. Whether letting through a company would suit you raises separate tax questions, and that is a matter for a qualified tax adviser, not for a web page.

Part 6 of 7

Selling instead: capital gains tax

Some landlords look at selling when the reduction costs more than they expected. A sale brings its own tax. GOV.UK says buy-to-let property may be subject to Capital Gains Tax, and that you must report and pay Capital Gains Tax on most sales of UK property within 60 days. The rates page says that from 6 April 2026 higher and additional rate taxpayers pay 24% on gains, basic rate taxpayers pay 18% up to the basic rate band of £37,700 and 24% above it, and the annual exempt amount is £3,000 for 2026 to 2027. Our guide to capital gains tax when you sell a house works through examples.

Part 7 of 7

What to do next

Work out your own figures with the Section 24 calculator.
Compare keeping and selling with the landlord keep or sell tool.
If you decide to sell with a tenant in place, read our guide to selling a house with tenants.
Check the energy certificate rules for let homes in our guide to EPC rules for landlords.
Talk to an accountant or tax adviser before you act. Tax rules can change in a Budget.

This page is general information, not advice.

Our take

Run your own numbers before you decide

Our view: Section 24 hits landlords very differently, so one headline answer will not fit you. In GOV.UK's examples, Sophia's tax is unchanged while John, with £51,000 of total income, pays £1,600 more. Those examples use 2020 to 2021 amounts with 2016 to 2017 tax rates, so they show the mechanism, not today's bill.

Your Property Check adds the property side. Our free property deal analyser is a BTL, HMO and BRR ROI calculator anchored to a value range, so you can set what a let earns against the figure from the Section 24 calculator.

Analyse a deal

Our opinion, drawn from the facts on this page: not advice and not a forecast. We earn from OfferCheck reports and from introducing sellers to cash buyers, so weigh it with that in mind (see our disclosure). We are not authorised or regulated by the FCA.

Questions, answered

Frequently asked questions

What is Section 24?

It is the popular name for the restriction of tax relief on finance costs for residential landlords. Individual landlords no longer deduct mortgage interest from rent. They get a tax reduction of 20% instead, fully in place since 6 April 2020.

How does the 20 percent credit work?

The reduction is 20% of the lowest of the finance costs, the property business profits and the adjusted total income above the personal allowance. Any unused amount is carried forward, and the reduction cannot create a refund.

Does incorporating help?

The GOV.UK guidance we read does not cover limited companies, so we cannot say. Moving property into a company raises other tax questions, so ask a qualified tax adviser before acting.

Who is affected?

GOV.UK's examples apply to individual landlords letting residential property. Partnerships, trusts and mixed cases are covered in HMRC's Property Manual. In GOV.UK's examples, John's tax rose by £1,600 while Sophia's did not change.

Does selling avoid the problem?

Selling ends the rental income but can trigger Capital Gains Tax. GOV.UK says the rate is 18% or 24% from 6 April 2026 depending on your income, with a £3,000 annual exempt amount, and the tax is reported within 60 days of most sales.

Where this comes from

Sources

Last reviewed 4 November 2026 by the Your Property Check team. This page is general information, not legal, tax or financial advice. For your own situation, speak to a conveyancing solicitor or another qualified professional.