If you’re a landlord with a mortgage, Section 24 is one of the most important tax rules to understand. Introduced in 2017 and fully in effect since April 2020, it changed how landlords claim tax relief on mortgage interest — and for many, it meant a significantly higher tax bill.
What Is Section 24?
Section 24 of the Finance (No. 2) Act 2015 removed landlords’ ability to deduct mortgage interest as an expense from their rental income. Instead, you now receive a 20% tax credit on your interest payments.
Before Section 24, if you paid £6,000 in mortgage interest, you could subtract that from your rental income before calculating tax. Now, you pay tax on the full rental profit, then get 20% of your interest back as a credit.
Why Does This Matter?
For basic rate taxpayers, the difference is minimal. You were getting 20% relief before, and you get 20% relief now — just calculated differently.
For higher rate (40%) and additional rate (45%) taxpayers, it’s a significant hit. You used to save 40p or 45p for every pound of interest. Now you only save 20p.
A Worked Example
Let’s compare a higher-rate taxpayer before and after Section 24.
The situation:
- Rental income: £15,000
- Allowable expenses (not including mortgage): £3,000
- Mortgage interest: £6,000
Old rules (pre-Section 24):
| Amount | |
|---|---|
| Rental income | £15,000 |
| Less expenses | −£3,000 |
| Less mortgage interest | −£6,000 |
| Taxable profit | £6,000 |
| Tax at 40% | £2,400 |
New rules (Section 24):
| Amount | |
|---|---|
| Rental income | £15,000 |
| Less expenses | −£3,000 |
| Taxable profit | £12,000 |
| Tax at 40% | £4,800 |
| Less 20% tax credit on interest | −£1,200 |
| Final tax bill | £3,600 |
Same property, same mortgage, same rent — but £1,200 more tax under Section 24.
The Hidden Problem: Pushed Into Higher Tax Bands
Section 24 can also push landlords into higher tax brackets, even if their actual profit hasn’t changed. Because mortgage interest no longer reduces your taxable income, your “income” looks higher on paper.
This can trigger:
- Loss of personal allowance (tapers away above £100,000)
- Higher rate tax on income that would previously have been basic rate
- Reduced eligibility for tax-free childcare or other income-tested benefits
For landlords with large mortgages and other income sources, this can create unexpected and substantial tax increases.
Who’s Affected Most?
Section 24 hits hardest if you:
- Pay higher or additional rate tax
- Have a large mortgage relative to rental income
- Own multiple properties with significant borrowing
- Have other income that already puts you near a tax threshold
Basic rate taxpayers with small mortgages may notice little difference.
What Are the Options?
Landlords have responded to Section 24 in various ways:
Incorporate — Limited companies can still deduct mortgage interest in full. But transferring properties triggers capital gains tax and stamp duty, so it’s not a simple fix. It mainly makes sense for new purchases.
Pay down the mortgage — Less interest means less impact from Section 24. But this ties up capital that could be used elsewhere.
Increase rent — Some landlords have raised rents to cover higher tax bills, though the market limits what’s possible.
Sell up — Some highly-leveraged landlords have exited the market entirely, particularly those whose properties showed a paper profit but a real-world loss after tax.
No Easy Escape
There’s no opt-out from Section 24. It applies to all individual landlords in the UK, regardless of property type or location. The only exception is furnished holiday lets, which are treated as a trade — though these rules are also changing from April 2025.
If you have a mortgage on a rental property, Section 24 affects you. Understanding how much it costs you is the first step to deciding what, if anything, to do about it.
Consider speaking to a property-specialist accountant if Section 24 is significantly increasing your tax bill.