If you own rental property in the UK, Section 24 is probably the most significant tax change to affect landlords in the past decade. It's changed how many landlords report and pay tax — and for some, it's made property investment significantly less profitable than it once was. Here's what you need to know.
What is Section 24?
Section 24 of the Finance (No.2) Act 2015 restricts the amount of mortgage interest landlords can deduct from their rental income for tax purposes. Before it was introduced, landlords could deduct 100% of their mortgage interest as a business expense, reducing their taxable profit accordingly. Section 24 replaced this with a tax credit system.
How does it work now?
Under Section 24, you can no longer deduct mortgage interest from your rental income when calculating your taxable profit. Instead, you receive a basic rate tax credit (currently 20%) on your mortgage interest costs. This means:
- Your taxable rental income is now higher (because interest isn't deducted upfront)
- You may be pushed into a higher tax bracket due to the inflated income figure
- You only receive relief at 20% — even if you're a higher or additional rate taxpayer
A simple example
Suppose you have annual rental income of £18,000 and mortgage interest costs of £10,000. Under the old rules, you'd have paid tax on just £8,000 of profit. Under Section 24, your taxable income is £18,000 — but you receive a 20% tax credit on the £10,000 interest, so £2,000 is deducted from your final tax bill. If you're a higher rate taxpayer, the difference is significant.
What can landlords still deduct?
Section 24 only restricts mortgage interest relief. You can still deduct other legitimate expenses from your rental income, including:
- Letting agent fees and management charges
- Property repairs and maintenance (not improvements)
- Buildings and contents insurance
- Accountancy fees
- Ground rent and service charges
- Council tax and utilities (when you're paying them, not the tenant)
Does Section 24 apply to limited companies?
No — Section 24 only applies to individual landlords who own property in their own name. If you hold property through a limited company, the company can still deduct mortgage interest as a business expense in full. This has led many landlords to consider incorporation, though this decision involves careful consideration of stamp duty, capital gains tax, and other factors.
Making Tax Digital for landlords
From April 2026, landlords with rental income above £50,000 will be required to comply with Making Tax Digital for Income Tax. This means keeping digital records and submitting quarterly updates to HMRC. We're already helping landlord clients prepare for this transition.
What should you do?
If you haven't reviewed your rental income tax position in light of Section 24, now is the time. A specialist landlord accountant can help you understand your exact position, assess whether a limited company structure makes sense, and ensure you're claiming everything you're entitled to claim.
Book a free consultation with NumberCrunch and we'll review your property portfolio tax position at no charge.