Answers · UK 2025/26
How does Section 24 affect tax on my buy-to-let mortgage interest?
Under Section 24 you cannot deduct mortgage interest from rental income; instead you get a 20% tax credit on the interest. A higher-rate landlord with GBP 10,000 interest gets a GBP 2,000 credit, not GBP 4,000 of relief, raising the effective tax bill.
Full answer
Section 24 means individual landlords can no longer deduct finance costs (mortgage interest, loan fees) as an expense against rental profit. Instead, you pay income tax on the full rental profit and then receive a basic-rate 20% tax-reducer credit on the finance costs. This hits higher and additional-rate landlords hardest and can push some into a higher band because the interest is no longer netted off. Worked example: rental income GBP 18,000, non-finance expenses GBP 3,000, mortgage interest GBP 10,000. Taxable rental profit is GBP 18,000 minus GBP 3,000 = GBP 15,000 (interest is NOT deducted here). A higher-rate taxpayer pays 40% on GBP 15,000 = GBP 6,000, then deducts the 20% interest credit of GBP 2,000 (20% of GBP 10,000), leaving GBP 4,000 tax. Before Section 24, the GBP 10,000 interest would have been fully deductible, giving GBP 5,000 profit taxed at 40% = GBP 2,000. The credit is limited to the lower of finance costs, property profits, or your total income above the personal allowance. Some landlords incorporate to keep full interest deductibility, though that brings corporation tax and other costs. Use the buy-to-let calculator to model your net position, and check gov.uk for the precise finance-cost relief rules.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.