Result
What it looks like under Section 24 vs. the old (pre-2017) rules. The difference is the tax shock the 2017–2020 phase-in delivered to personal-name landlords.
Rental income£14,400
Other allowable expenses£2,400
Profit before tax (S24)£12,000
Tax on profit at your band£4,800
Less: 20% mortgage interest credit−£1,200
Tax due under Section 24£3,600
After-tax profit£8,400
Effective tax rate on the property25.0%
Tax under old (pre-S24) rules£2,400
Extra tax cost from S24
Important: This is a simplified one-property calculator. Real tax returns include personal allowance interactions, multiple properties, capital gains, and other income sources. Use it as a directional indicator and consult an accountant for filing decisions.
How the calculator works
Section 24 changed how mortgage interest is treated on UK residential rentals owned in a personal name. The pre-2017 rules let you deduct mortgage interest from rental income before calculating tax. The post-April-2020 rules force you to calculate tax on the rental profit ignoring mortgage interest, then subtract 20% of the mortgage interest as a tax credit.
For a basic-rate (20%) taxpayer the change is neutral — the 20% credit equals the 20% deduction they would have got. For higher-rate (40%) and additional-rate (45%) taxpayers, the difference between their marginal rate and the basic-rate credit is the extra tax.
Worked example. Higher-rate landlord, £14,400 rent, £6,000 mortgage interest, £2,400 other expenses. Pre-S24: profit £6,000, tax at 40% = £2,400. Under S24: profit £12,000 (ignoring interest), tax at 40% = £4,800, less 20% × £6,000 credit (£1,200) = £3,600 tax. That's £1,200 extra tax per year on a single property — the higher-rate landlord pays 50% more.
When to consider incorporation
Many higher-rate landlords moved properties into limited companies (SPVs) between 2017 and 2024. The headline reason is that limited companies deduct mortgage interest as a normal business expense before calculating Corporation Tax (currently 19% / 25% depending on profit), avoiding Section 24 entirely.
The downsides:
- Stamp Duty Land Tax on transfer to the company — 3% surcharge on residential property, no main-residence exemption
- Capital Gains Tax on disposal of the property to the company at market value
- BTL Ltd Co mortgage rates are typically 0.5–1.5 percentage points higher than personal BTL
- Dividend tax when you extract profits to your personal name (8.75% / 33.75% / 39.35% above the £500 allowance)
- Accountancy costs typically £600–£1,500/year per SPV
As a rough rule, higher-rate landlords with 4+ leveraged properties usually benefit from incorporation; basic-rate landlords almost never. Get individual tax advice before incorporating — the right answer depends on your full financial picture.
What expenses can you still claim?
Section 24 only restricts mortgage interest. All other allowable expenses remain fully deductible:
- Letting agent fees (set-up and management)
- Repairs (not improvements — these are capital)
- Insurance premiums (buildings, landlord, rent protection)
- Ground rent and service charge
- Council tax during void periods
- Utilities you pay (typical for HMO landlords)
- Accountancy and bookkeeping fees
- Professional subscriptions (NRLA, RLA membership)
- Travel costs to the property (HMRC's approved mileage rates apply)
- 10% wear and tear allowance for furnished lets (subject to current legislation)
Frequently asked questions
What is Section 24 for landlords?
Section 24 of the Finance (No. 2) Act 2015 restricts mortgage interest tax relief for residential landlords owning property in their personal name. Since April 2020, mortgage interest can no longer be deducted as a rental expense — instead landlords receive a 20% basic-rate tax credit on the finance cost. The change does not apply to limited company landlords or to furnished holiday lets.
How is Section 24 actually calculated?
Step 1: calculate rental profit ignoring mortgage interest (rent minus all other allowable expenses). Step 2: add the rental profit to your other income to find your tax band. Step 3: calculate the tax due. Step 4: subtract 20% of the mortgage interest as a tax credit. The result is the tax you owe on your rental income under Section 24.
Does Section 24 apply to limited companies?
No. Section 24 only applies to landlords owning rental property in their personal name. Limited companies (SPVs) deduct mortgage interest as a normal business expense before calculating Corporation Tax. This is why many higher-rate landlords incorporated their portfolios after the 2017 phase-in began.
Should I incorporate my buy-to-let portfolio to avoid Section 24?
It depends. Incorporation triggers Stamp Duty Land Tax (3% surcharge on residential property) and potentially Capital Gains Tax on disposal to the company. Tax savings from Section 24 relief must outweigh these one-off costs plus ongoing higher-rate BTL Ltd Co mortgage costs and accountancy fees. As a rule of thumb, higher-rate or additional-rate landlords with 4+ properties often benefit; lower-rate landlords with 1–2 typically do not. Get individual tax advice before incorporating.
Does Section 24 apply to furnished holiday lets?
No, but this is changing. Currently FHL income is treated as trading income with full mortgage interest relief. From April 2025, FHLs lose their special status and will be treated as standard rental income subject to Section 24. Plan your tax strategy accordingly.
Can I still deduct anything from rental income?
Yes. All other allowable expenses remain deductible: agent fees, repairs (not improvements), insurance, ground rent, service charge, council tax for void periods, accountancy fees, professional subscriptions, travel to the property, and 5% of furnished-rent under the wear-and-tear rule. Only mortgage interest is restricted.