Section 24 Explained
How mortgage interest tax relief changed for UK landlords and what it means for your rental property finances.
The Short Version
Section 24 restricts how much mortgage interest you can offset against your rental income for tax purposes. Before 2017, you could offset all your mortgage interest against rental income. Now, you are restricted to 20% relief if you are a higher or additional rate taxpayer.
This matters because it changes the maths of buy-to-let. Some properties that looked profitable before Section 24 now show a very different picture.
What Changed
Before April 2017: Higher rate taxpayers could deduct all their mortgage interest from rental income before calculating tax. A landlord with £20,000 rental income and £15,000 mortgage interest would pay tax on £5,000.
After April 2017: The calculation changed. You now get 20% tax relief on the mortgage interest, regardless of your tax rate. The same landlord now effectively pays tax on more of their rental income.
Practical effect: If you are a 40% taxpayer, your tax bill on that £20,000 rental income is higher than it was before.
Who It Affects
Section 24 Affects You If:
- Own a residential rental property with a mortgage
- Are a higher or additional rate taxpayer (40% or 45%)
- Have rental income that pushes you into a higher tax bracket
Section 24 Does NOT Affect:
- Own properties outright with no mortgage
- Are a basic rate taxpayer only
- Have holiday lets (FHLs have different rules)
The Numbers in Practice
For a typical landlord with one buy-to-let property:
Scenario: £24,000 annual rental income, £1,500 monthly mortgage interest (£18,000/year)
| Before Section 24 | After Section 24 | |
|---|---|---|
| Rental income | £24,000 | £24,000 |
| Mortgage interest | £18,000 | £18,000 |
| Taxable income | £6,000 | £24,000 |
| Tax at 40% | £2,400 | £9,600 |
| Difference | £7,200 more tax |
This is approximate, but it illustrates the scale of the impact.
What Landlords Are Doing About It
Some Are Selling
Properties that no longer pencil out as investments are being sold, particularly by smaller landlords exiting the market.
Some Are Restructuring
Moving properties into a limited company can sometimes help with the cash flow impact, though this brings its own complications.
Some Are Switching to FHLs
Furnished Holiday Lets have different tax treatment. Learn about FHL rules.
Some Are Doing Nothing
Many landlords are continuing as before, absorbing the higher tax cost, particularly those with older mortgages at lower rates.