BTL Section 24 Impact Calculator

Section 24 of the Finance (No.2) Act 2015 — fully phased in from the 2020/21 tax year — fundamentally changed how UK landlords are taxed on mortgage interest costs. Before 2017, landlords could deduct 100% of their mortgage interest from rental income before calculating taxable profit, just like any other business expense. From 2020/21 onwards, mortgage interest is no longer deductible at all. Instead, landlords receive a 20% basic-rate tax credit on the interest paid — which sounds similar but has a dramatically different effect for higher and additional-rate taxpayers. The difference matters because under current rules, your taxable profit is calculated on rental income minus allowable expenses only (not including mortgage interest). If you are a 40% higher-rate taxpayer, you pay 40% on the higher profit figure and only receive a 20% credit on the interest — creating an effective extra 20% tax cost on the interest. For a landlord paying £12,000 a year in mortgage interest, that means £2,400 per year more in tax compared to the old regime. In extreme cases, a highly geared property (large mortgage relative to value) can generate a loss in cash terms while producing a tax liability on paper. This calculator shows the comparison side by side. Enter your rental income, annual mortgage interest, other deductible expenses and your income tax band. The results show taxable profit, income tax and net cash under both old and current rules, with the annual difference prominently highlighted. A cash flow warning appears if your after-tax position is negative. For landlords considering the impact across a portfolio, multiply the annual difference by the number of properties. The most common restructuring responses include transferring properties into a limited company (which still allows full interest deduction but has other costs and CGT implications), overpaying the mortgage to reduce interest charges, raising rents to compensate, or selling less profitable properties. The BTL calculator also models rental yield and cashflow. Seek specialist tax advice before making structural changes to your portfolio.