Mortgage Tax Return Calculator UK 2025/26

Mortgage tax return calculator UK 2025/26 — Section 24 mortgage interest credit for BTL landlords. Calculate rental tax

Quick answer: Since 2020/21, BTL landlords cannot deduct mortgage interest from rental income. Instead, you get a 20% basic-rate tax credit on interest. On £8,000 interest that's only £1,600 relief — significantly less than the old fully-deductible regime.
Mustafa Bilgic
Reviewed by Mustafa Bilgic · UK Calculator Editor ·

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If you're a buy-to-let landlord, the way mortgage interest is treated changed dramatically in 2017-2020. Section 24 of the Finance Act removed full deductibility and replaced it with a flat 20% tax credit. This calculator helps you compute your real rental tax liability under the 2025/26 rules.

How mortgage tax return calculator works in 2025/26

Pre-2017, landlords could deduct 100% of mortgage interest from rental income before tax. The new system (fully phased in by 2020/21) works completely differently:

  1. Calculate rental profit IGNORING mortgage interest
  2. Apply income tax to that profit at your marginal rate
  3. SUBTRACT a tax credit equal to 20% × mortgage interest paid

This punishes higher-rate (40%) and additional-rate (45%) landlords who lose out on the 20-25% extra relief they previously enjoyed. A 40% taxpayer paying £10,000 interest now gets £2,000 credit instead of £4,000 deduction — a £2,000/year cost.

Limited company workaround: If you hold BTL via a limited company, you still deduct interest fully against corporation tax (19-25%). For high-income landlords with several properties this can save thousands.

Worked example: Higher-rate landlord, £15k rent, £8k interest

Rental profit (pre-interest) £15,000. Tax at 40% = £6,000. Less 20% credit on £8,000 = £1,600. Net tax £4,400. Old regime: £15k − £8k = £7k profit × 40% = £2,800. New regime costs £1,600 more.

Gross: £50,000 → Take-home: £39,519.60/year (£3,293.30/month)

Worked example: Basic-rate landlord, £12k rent, £6k interest

No effective change — 20% credit equals what they'd have saved deducting interest. Tax = (£12k × 20%) − (£6k × 20%) = £1,200.

Gross: £30,000 → Take-home: £25,119.60/year (£2,093.30/month)

Worked example: Additional-rate landlord via Ltd Co, £30k rent, £20k interest

In a Ltd Co: profit £10k × 19% (small profits) = £1,900 corp tax. Personally same scenario: tax (£30k × 45%) − (£20k × 20%) = £13,500 − £4,000 = £9,500. Ltd Co saves £7,600.

Gross: £150,000 → Take-home: £90,657.90/year (£7,554.82/month)

Frequently asked questions

What is Section 24 mortgage interest relief?
Section 24 of the Finance (No.2) Act 2015 phased out full deduction of mortgage interest from rental income (2017-2020) and replaced it with a 20% basic-rate tax credit. From 2020/21, the new rules apply 100%.
Does Section 24 apply to all property types?
Section 24 applies to residential BTL property held by individuals. It does NOT apply to: (a) commercial property, (b) furnished holiday lets meeting FHL criteria, (c) property held by limited companies, (d) properties owned by partnerships of corporate landlords.
How much extra tax does Section 24 cost higher-rate landlords?
Roughly 20% × interest paid. £10,000 interest = £2,000/year extra tax for a 40% landlord vs the old regime. Over 25-year mortgage life, that's £50,000 extra tax — significant for portfolio landlords.
Can I switch my BTL to a limited company?
Yes but it's not free. Transfer triggers Capital Gains Tax (BTL CGT 18%/24% 2025/26) and SDLT (3-5% surcharge applies). Many landlords incorporate via "incorporation relief" but rules are complex — get specialist advice.
Are mortgage fees deductible?
Yes — mortgage arrangement fees, broker fees, and survey/valuation costs ARE fully deductible from rental income (they're not "interest" for Section 24 purposes). Only the interest component is restricted.
What's a furnished holiday let exemption?
FHLs let on commercial terms with 210+ days available, 105+ days actually let, and average let ≤31 days, qualify for full mortgage interest deduction (pre-Section 24 rules). However, FHL status is changing from April 2025 — restrictions may apply.
Does Section 24 affect my Self Assessment?
Yes — you need form SA105 (UK Property pages). Box 26 reports mortgage interest paid. The 20% credit applies AFTER calculating taxable rental profit elsewhere on the form. HMRC's online filing handles the calculation automatically.

Official UK Sources

Last reviewed: May 2026 against HMRC 2025/26 rates.

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