Section 24 is the tax change that quietly reshaped buy-to-let. Fully in force since 2020/21, it means many higher-rate landlords now pay income tax on rent that goes straight to the lender. If your mortgage interest is significant, this is the rule that decides whether a property makes money.
What Section 24 actually does
Individual landlords can no longer deduct mortgage interest from rental income before calculating taxable profit. Instead you declare the full rent as income and receive a flat 20% basic-rate tax credit on your finance costs — regardless of whether you pay tax at 20%, 40% or 45%.
Why it hits higher-rate landlords hardest
- Basic-rate (20%) taxpayers are broadly unaffected — 20% relief either way.
- Higher-rate (40%) and additional-rate (45%) taxpayers used to get relief at their full rate; now they get just 20%.
- Because the *full* rent counts as income, Section 24 can also push a landlord into a higher tax band or erode allowances.
Looking ahead to 2027
From April 2027, property income is expected to be taxed at new rates of 22% / 42% / 47%, while the mortgage-interest credit stays at 20%. For higher-rate landlords that widens the gap between the tax rate and the relief rate — making the restriction more expensive, not less.
What landlords do about it
- 1Model your real after-tax position — headline rent can flatter a geared property badly.
- 2Consider whether a limited company structure fits: companies still deduct interest as a business expense and pay corporation tax, though incorporation has its own costs and capital-gains consequences.
- 3Review fixed-rate mortgages and gearing levels with the tax treatment in mind.
- 4Take professional advice before restructuring — getting it wrong is expensive.
How Rentwire helps
You can't plan around Section 24 without knowing your true numbers per property. Rentwire keeps rent, finance costs and expenses reconciled and current, so when you ask "what did each property actually net last quarter?" you — and your accountant — are working from real figures, not a year-end guess.
Section 24 is a personal-tax question with no one-size answer. Use this as background, then take advice specific to your income, gearing and goals.
Frequently asked questions
- Can landlords still deduct mortgage interest?
- Individual landlords cannot deduct it from rental income. Instead they get a flat 20% basic-rate tax credit on finance costs. Limited company landlords can still deduct interest as a business expense.
- Does Section 24 affect basic-rate taxpayers?
- Largely no — they receive 20% relief either way. But because the full rent counts as income, it can occasionally push someone into the higher-rate band, so it's worth checking your own figures.
This article is general information for UK landlords and letting agents, not legal, tax or financial advice. Rules change and individual circumstances differ — check the latest guidance from GOV.UK or a qualified professional before acting.