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What Is Section 24 Tax? A Simple Guide for UK Landlords

Landlords
Posted in   Oct 08 , 2026
What Is Section 24 Tax? A Simple Guide for UK Landlords

Mortgage interest used to be deducted from rental income when individual landlords worked out their taxable profit. That changed under Section 24. Individual residential landlords generally cannot deduct their mortgage interest from rental income in the usual way. Instead, they receive a tax reduction based on their finance costs.

This can make a noticeable difference to landlords with larger mortgages, particularly those paying higher rates of Income Tax. Here is how the numbers work and what landlords need to know for 2026/27 and beyond.

What is Section 24 tax?

Section 24 refers to the rules that restrict tax relief on finance costs for individual landlords with residential property. The rules were introduced gradually from 2017 and became fully effective from April 2020. 

Instead of deducting residential mortgage interest when calculating taxable property profit, affected landlords receive a tax reduction based on their finance costs. The restriction can apply to mortgage interest, certain loan interest and some costs connected with taking out or repaying property loans. 

It mainly affects individual landlords. UK-resident companies are not subject to the finance-cost restriction in the same way. They can generally claim interest on property loans as an allowable expense when calculating Corporation Tax.

How does Section 24 affect your tax bill?

The easiest way to understand Section 24 is through an example. Suppose a landlord receives:

  • £18,000 in annual rent

  • £3,000 in other allowable property expenses

  • £10,000 in mortgage interest

Under the current Section 24 rules, individual landlords receive a basic-rate tax reduction for qualifying finance costs rather than deducting the full mortgage interest from their rental income. The property profit before the finance-cost reduction is therefore:

£18,000 - £3,000 = £15,000

The landlord can then receive a tax reduction based on the mortgage interest. For 2026/27, the basic-rate reduction is 20%, subject to HMRC's rules and limits.

So, using the £10,000 finance cost:

£10,000 × 20% = £2,000 tax reduction

This does not mean the landlord simply pays £2,000 less tax in every situation. The final calculation can depend on total income, property profits and other factors. HMRC explains that the reduction is subject to limits and cannot create a tax refund.

Why does Section 24 affect higher-rate landlords?

The important point is that the finance-cost reduction is restricted to the basic rate. For 2026/27, the standard Income Tax rates are 20%, 40% and 45%.

So a landlord paying tax at a higher rate does not receive 40% relief on their residential mortgage interest. The finance-cost reduction is calculated at the basic rate. This can create an uncomfortable situation: a landlord may have relatively little cash left after paying the mortgage, but their taxable property profit can still look much higher because the mortgage interest is not deducted in the normal way.

Does Section 24 apply to limited companies?

Section 24 affects individual landlords differently from companies. A UK-resident company is not subject to the individual residential finance-cost restriction in the same way. HMRC states that companies can generally claim interest on property loans as an allowable expense when calculating Corporation Tax.

This is one reason some landlords consider buying properties through a limited company. However, that does not mean a company is automatically more tax efficient. Corporation Tax, taking money out of the company, mortgage availability, legal costs and other expenses all need to be considered.

What changes to Section 24 are coming in 2027?

There is an important upcoming change that landlords should be aware of.

From 6 April 2027, the government is introducing separate tax rates for property income:

  • 22% property basic rate

  • 42% property higher rate

  • 47% property additional rate

Finance-cost relief will also be provided at the new 22% property basic rate.

This means older Section 24 guides that simply say “landlords receive 20% relief” may not remain accurate for the 2027/28 tax year.

If you are planning to hold a rental property for several years, it is worth considering both the current and future tax position rather than basing your decision on one year's calculation.

What should landlords check?

Section 24 is only one part of the return from a rental property.

Before making a property or mortgage decision, consider:

  1. Annual rental income

  2. Mortgage interest and other finance costs

  3. Allowable property expenses

  4. Your wider tax position

  5. Management and maintenance costs

  6. Potential periods without a tenant

HMRC confirms that expenses such as letting-agent fees, insurance, repairs, utilities and certain professional fees can generally be deducted when they meet the relevant rules.

For a broader look at rental expenses, see Cribs Estates' guide to rental property expenses landlords can claim.

How Cribs Estates can help landlords

At Cribs Estates, we support landlords across London with tenant sourcing, rent collection, maintenance, compliance and ongoing property management. We work with both individual landlords and property investors and focus on keeping rental properties well managed.

Our property management services for landlords can take care of the practical side of running a rental property, from finding tenants and collecting rent to arranging maintenance and handling compliance.

Cribs also has long-standing landlord relationships. One client says, “Cribs has found tenants for her properties across London for nine years and manages some of them”.

Frequently Asked Questions

Can landlords still claim tax relief on mortgage interest?

Yes, but individual residential landlords generally receive a finance-cost tax reduction rather than deducting the mortgage interest directly from rental income. For 2026/27, the reduction is calculated at the basic rate of 20%, subject to HMRC's rules.

Does Section 24 apply to limited companies?

The individual Section 24 restriction does not apply to UK-resident companies in the same way. Companies can generally claim interest on property loans as an allowable expense for Corporation Tax purposes.

What happens to Section 24 in 2027?

From 6 April 2027, separate property-income tax rates of 22%, 42% and 47% will apply, and finance-cost relief will be provided at the 22% property basic rate.


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What Is Section 24 Tax? A Simple Guide for UK Landlords

Mortgage interest used to be deducted from rental income when individual landlords worked out their taxable profit. That changed under Section 24. Individual residential landlords generally cannot deduct their mortgage interest from rental income in the usual way. Instead, they receive a tax reduction based on their finance costs.This can make a noticeable difference to landlords with larger mortgages, particularly those paying higher rates of Income Tax. Here is how the numbers work and what landlords need to know for 2026/27 and beyond.What is Section 24 tax?Section 24 refers to the rules that restrict tax relief on finance costs for individual landlords with residential property. The rules were introduced gradually from 2017 and became fully effective from April 2020. Instead of deducting residential mortgage interest when calculating taxable property profit, affected landlords receive a tax reduction based on their finance costs. The restriction can apply to mortgage interest, certain loan interest and some costs connected with taking out or repaying property loans. It mainly affects individual landlords. UK-resident companies are not subject to the finance-cost restriction in the same way. They can generally claim interest on property loans as an allowable expense when calculating Corporation Tax.How does Section 24 affect your tax bill?The easiest way to understand Section 24 is through an example. Suppose a landlord receives:£18,000 in annual rent£3,000 in other allowable property expenses£10,000 in mortgage interestUnder the current Section 24 rules, individual landlords receive a basic-rate tax reduction for qualifying finance costs rather than deducting the full mortgage interest from their rental income. The property profit before the finance-cost reduction is therefore:£18,000 - £3,000 = £15,000The landlord can then receive a tax reduction based on the mortgage interest. For 2026/27, the basic-rate reduction is 20%, subject to HMRC's rules and limits.So, using the £10,000 finance cost:£10,000 × 20% = £2,000 tax reductionThis does not mean the landlord simply pays £2,000 less tax in every situation. The final calculation can depend on total income, property profits and other factors. HMRC explains that the reduction is subject to limits and cannot create a tax refund.Why does Section 24 affect higher-rate landlords?The important point is that the finance-cost reduction is restricted to the basic rate. For 2026/27, the standard Income Tax rates are 20%, 40% and 45%.So a landlord paying tax at a higher rate does not receive 40% relief on their residential mortgage interest. The finance-cost reduction is calculated at the basic rate. This can create an uncomfortable situation: a landlord may have relatively little cash left after paying the mortgage, but their taxable property profit can still look much higher because the mortgage interest is not deducted in the normal way.Does Section 24 apply to limited companies?Section 24 affects individual landlords differently from companies. A UK-resident company is not subject to the individual residential finance-cost restriction in the same way. HMRC states that companies can generally claim interest on property loans as an allowable expense when calculating Corporation Tax.This is one reason some landlords consider buying properties through a limited company. However, that does not mean a company is automatically more tax efficient. 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