Calculate how Section 24 affects your rental profits and compare your tax bill under the old and new systems. See exactly how much extra tax you pay as a landlord.
Section 24 Tax Impact Calculator
Enter your rental figures below to see your tax liability under the current Section 24 rules (fully in force since April 2020) and compare it to the pre-2017 system where mortgage interest was fully deductible.
Under Section 24 (Current Rules)
Rental income—
Less: other allowable expenses—
Taxable profit (mortgage NOT deducted)—
Tax on taxable profit (before credit)—
20% finance cost tax credit—
Net tax payable (Section 24)—
Old System (Pre-2017 Rules)
Old taxable profit (interest fully deducted)—
Old tax payable—
Section 24 Impact
Extra annual tax cost of Section 24—
Extra tax over 5 years—
Effective tax rate on rental income—
This calculator is for guidance only. Your actual tax position depends on your total income, personal allowance, other deductions and HMRC's specific calculations. Consult a qualified tax adviser for your personal situation.
What Is Section 24?
Section 24 of the Finance (No. 2) Act 2015, commonly known as the "landlord tax" or "mortgage interest restriction", fundamentally changed how individual landlords are taxed on their rental profits. Before April 2017, landlords could deduct mortgage interest and other finance costs in full from their rental income before calculating their tax bill. This meant a 40% taxpayer effectively got relief at 40% on their interest payments.
The new rules, phased in from April 2017 and fully in force since April 2020, prevent landlords from deducting any finance costs from their rental income. Instead, they receive a basic rate (20%) tax credit. The practical effect is that higher and additional rate taxpayers pay significantly more tax on the same rental property with the same mortgage.
Key change: A landlord on 40% tax paying £9,000/year in mortgage interest used to save £3,600 in tax (40% of £9,000). Under Section 24, they save only £1,800 (20% of £9,000) — an extra £1,800 per year in tax for the same property and mortgage.
How Section 24 Is Calculated
The calculation under the current Section 24 rules works as follows:
Calculate profit before finance costs: Rental income minus all allowable expenses except mortgage interest.
Tax on taxable profit: Multiply the profit (before deducting mortgage interest) by your marginal tax rate.
Finance cost tax credit: 20% of the lower of (a) finance costs, (b) profit before finance costs, or (c) adjusted total income above the higher rate threshold.
Net tax payable: Tax calculated in step 2 minus the credit from step 3.
Income Tax Band
Old Relief Rate
New Section 24 Credit
Lost Relief Per £1,000 Interest
Basic rate (20%)
20%
20%
£0 — no change
Higher rate (40%)
40%
20%
£200 extra tax
Additional rate (45%)
45%
20%
£250 extra tax
Who Is Affected by Section 24?
Section 24 applies to individual landlords letting residential property. It does not apply to:
Limited companies — they can still deduct mortgage interest in full
Commercial property landlords
Basic rate taxpayers (the credit equals the old deduction, so there is no additional cost)
Important: Even if you are a basic rate taxpayer now, Section 24 calculates tax on your gross rental profit (before mortgage interest). This higher gross income can push you into the higher rate band, withdraw your personal allowance, or affect child benefit eligibility — so the real impact may be greater than the headline rate difference suggests.
Incorporation and Other Planning Options
Since Section 24 does not apply to limited companies, many landlords have considered incorporating their portfolio. However, this involves significant costs:
Stamp Duty Land Tax (SDLT) on transfer to the company at market value
Capital Gains Tax (CGT) on any gain since acquisition
Ongoing corporation tax at 25% (small profits rate 19%)
Dividend tax when extracting profits
Incorporation makes financial sense for some landlords but not others. A detailed cash flow analysis comparing long-term costs is essential before making this decision. Other strategies include selling higher-LTV properties, making overpayments to reduce mortgage balances, or restructuring income with a spouse using Form 17 to shift income to the lower earner.
Frequently Asked Questions
Section 24 of the Finance Act 2015 removed the ability for individual landlords to deduct mortgage interest from rental income before calculating tax. Instead, a basic rate (20%) tax credit is given on finance costs. It was phased in from April 2017 and fully in force since April 2020.
Section 24 affects individual landlords who own residential rental properties in their own name and pay higher or additional rate income tax. Basic rate taxpayers are generally unaffected because the 20% credit matches their tax rate. Limited companies are not affected.
No. Section 24 applies only to residential property lettings. Commercial property landlords can still deduct finance costs in full from rental income.
Limited companies can still deduct mortgage interest as a business expense, so many landlords have incorporated. However, incorporation has its own costs including SDLT, CGT on transfer, and ongoing corporation tax and dividend tax. Professional advice is essential.
Finance costs include mortgage interest, arrangement fees, early redemption charges, and any other interest charged on loans used to purchase or improve rental property. The principal repayment element does not qualify for the tax credit.
Yes. If the 20% tax credit exceeds the tax payable on rental profits in a given year, the unused credit can be carried forward to future tax years when rental profits are higher.
Under Section 24, gross rental profits (before finance cost deduction) count as income for personal allowance and higher rate threshold purposes. This means some landlords may lose their personal allowance or be pushed into higher rate tax even though their real economic profit is lower.
Furnished Holiday Lettings (FHLs) had different rules, but from April 2025 FHLs lost their special tax treatment and are now treated the same as normal residential lettings, so Section 24 now applies to FHLs too.
You can still fully deduct letting agent fees, property management costs, repairs and maintenance, landlord insurance, ground rent, service charges, accountancy fees, advertising costs, and council tax and utilities paid by the landlord. Mortgage interest is the main cost that changed.
On your SA100/SA105, enter your gross rental income, deduct allowable expenses (not mortgage interest), then enter the full finance cost separately. HMRC calculates the 20% tax credit automatically. The relief appears as a reduction on your tax bill, not in your profit calculation.
A deduction reduces taxable profit before tax is calculated, saving tax at your marginal rate (40% or 45% for higher earners). A 20% credit reduces your final tax bill by only 20% of the cost, regardless of your tax rate. For a 40% taxpayer, the effective relief falls from 40p per £1 to 20p per £1.
Speak to a specialist property tax accountant or a chartered tax adviser (CTA). HMRC's Property Income manual (PIM) provides detailed technical guidance. The National Residential Landlords Association (NRLA) also offers resources on Section 24 planning.