Section 24 of the Finance Act 2017 restricts how much mortgage interest landlords can deduct from their rental income for tax purposes. Since 2020, landlords who are higher or additional rate taxpayers can only claim 20% tax relief on mortgage interest, not the full amount. Many landlords are still claiming the full deduction and are therefore underdeclaring their taxable income.

How does HMRC know if I have not declared my rental income correctly?

HMRC's Connect system cross-references data from multiple sources including mortgage interest data reported by lenders, Land Registry property ownership records, deposit protection scheme registrations, and what landlords declare on their Self Assessment returns. Discrepancies that used to pass unnoticed are now caught automatically.

What is voluntary disclosure?

Voluntary disclosure means you tell HMRC first about any errors in your tax returns. You pay what you owe plus interest, but you avoid penalties or receive significantly reduced penalties. This is substantially better than being found first, where penalties can reach 200% of the tax owed in serious cases.

Am I affected by Section 24 if I am a basic rate taxpayer?

No. Section 24 only affects higher rate and additional rate taxpayers. If you are a basic rate taxpayer, you can still claim full mortgage interest relief. However, if your rental income pushes you into a higher tax bracket, Section 24 will apply to the portion of your income that falls into the higher rate band.

How do I calculate my Section 24 exposure?

Take your annual mortgage interest, multiply it by 0.8, subtract that from your rental income, and compare that to the taxable profit you have been declaring. If those numbers are substantially different, you may have an error in your previous returns. A property tax adviser can help you calculate the exact amount.

How do I find a tax adviser who specialises in property landlords?

Look for an accountant or tax adviser who specifically works with residential landlords and understands Section 24, furnished holiday letting rules, and property income taxation. The Association of Taxation Technicians (ATT) and the Chartered Institute of Taxation (CIOT) have member directories you can search. Ask specifically about their experience with landlord tax when you make contact.

Educational use only: This platform provides information for educational purposes and should not be considered financial, investment, or legal advice.

May 11, 2026 Syd Lawrence

HMRC's Landlord Tax Crackdown: What It Means and What To Do Now

The difference between worrying and knowing

Syd Lawrence

CEO & Co-founder at Delphina

Syd got fed up with being kept confused by the UK personal finance industry. So he built the tool he wished existed. Qualified to provide financial advice, prefers to provide financial clarity. No agenda. Just someone who finally got clear and wanted everyone else to be able to too.

If you own rental property, you have probably seen the headlines about HMRC cracking down on landlords.

Here is what is actually happening.

HMRC has moved from reactive to proactive enforcement. Previously, the taxman largely waited for errors to appear in your return. Now they are cross-referencing data from multiple sources before you even file.

This is not a rumour. It is a statement of intent from HMRC's annual report and what tax advisers are reporting in practice.

What HMRC Is Now Watching

The data sources HMRC cross-references for landlord income:

Rental income declared on Self Assessment
Land Registry property ownership records
Mortgage lender data via the property data pillar
Deposit protection scheme registrations
Tenant referencing data where available

The result: discrepancies that used to pass unnoticed are now caught automatically.

The Section 24 Error HMRC Is Currently Targeting

Most landlord tax issues coming out of this crackdown are Section 24 calculation errors.

Under Section 24, higher and additional rate taxpayers can only claim 20% tax relief on mortgage interest, not the full amount. Many landlords are still deducting the full interest.

The numbers

For a landlord with a 250,000 pound mortgage at 5%, this error costs approximately 1,500 pounds per year in additional tax. Over three years, with penalties and interest, that is roughly 6,000 pounds owed to HMRC.

Most landlords making this error are not deliberately evading tax. They simply do not know the rule has changed.

The Numbers That Put This in Perspective

From HMRC's own data on property income investigations:

Average tax shortfall identified9,700 pounds

Average penalties on top of the tax3,200 pounds

Interest on unpaid tax2.25% above Bank Rate

For a landlord who under-reported by 500 pounds per month for three years, the total cost including penalties and interest can easily reach 25,000 pounds.

The Voluntary Disclosure Route

If you think your returns might contain errors, voluntary disclosure is significantly better than being found first.

Voluntary disclosure

You tell HMRC first. You pay what you owe plus interest. No penalties, or significantly reduced penalties.

Investigation

HMRC comes to you. You pay what you owe, plus interest, plus penalties that can reach 200% of the tax in serious cases.

The cost of sorting this yourself is your adviser's fee. The cost of waiting is penalties plus interest on top of everything you already owed.

The One Thing to Do This Week

Download your last three years of tax returns. Check what you declared versus what you actually received in rental income.

If anything does not match, speak to a property tax adviser before HMRC's data matching finds it first.

The window for voluntary disclosure is not unlimited. HMRC has been clear about its intent. The question is whether you fix it first.

Get clear on where you stand

If you have rental property alongside pensions, investments, and a mortgage, Delphina helps you see the complete picture. Understand what your rental portfolio is actually returning after tax.

Get Clear Now