Section 24 for Landlords: Mortgage Interest Tax Relief Explained

Updated: 6 October 2026

Section 24 is the commonly used name for the Income Tax restriction on residential property finance costs. For individuals and some trustees with residential letting income, qualifying mortgage interest and other finance costs are generally not deducted when calculating taxable property profit. Instead, a basic-rate tax reduction may be available.

This guide explains the current UK Income Tax position in plain English. It is general information, not personal tax, accounting, legal, mortgage or investment advice.

Who does the Section 24 restriction apply to?

HMRC says the restriction can apply to:

• individual UK residents who let residential property in the UK or overseas;
• individual non-UK residents who let residential property in the UK;
• individuals who let residential property through a partnership;
• trustees and beneficiaries of trusts who are liable to Income Tax on residential property profits; and
• personal representatives and estate beneficiaries in certain circumstances.

Companies are not within this particular Income Tax restriction. That does not make incorporation the right answer for every landlord: company tax, extracting income, SDLT, Capital Gains Tax, lending, legal and commercial consequences all need separate consideration.

If a sale or transfer is part of that decision, see the guide to Capital Gains Tax for buy-to-let landlords before treating a change of structure as a purely Income Tax decision.

The restriction is not avoided simply because a letting is carried on through a partnership. An individual partner’s relevant share may still be affected. Trusts and estates have specific calculation rules, so they should take tailored professional advice rather than rely on a simple example.

Landlords who live abroad should also check the Non-Resident Landlord Scheme guide, which explains rent withholding and NRL1 approval alongside this finance-cost restriction.

Which costs are affected?

For a residential property business, the restricted costs can include:

• interest on mortgages and other loans;
• interest on loans used to buy furnishings for a let property;
• overdraft interest, where it is a qualifying property-business cost;
• alternative-finance returns;
• fees and incidental costs of obtaining or repaying finance; and
• discounts, premiums and amounts economically equivalent to interest.

Capital repayments are different: repaying the capital borrowed is not a finance cost for this relief. Nor does the restriction turn private or non-business borrowing into an allowable expense. Where a loan serves both residential and commercial property, business and private purposes, the relevant amount may need a just-and-reasonable split.

How the basic-rate tax reduction works

First, the taxable profit from the residential property business is worked out without deducting the restricted finance costs. A tax reduction may then be available against the landlord’s Income Tax liability.

For an individual, HMRC describes the possible reduction as the basic-rate value of the lowest of:

1. the eligible finance costs for the year, plus relevant unrelieved finance costs brought forward;
2. the property-business profit after any brought-forward property losses; and
3. adjusted total income above the personal allowance, excluding savings and dividend income.

The basic rate is currently 20%. The calculation can be more involved where there are UK and overseas property businesses, partnership interests, estate income, losses, mixed borrowing or other income. The reduction cannot create a tax refund.

Illustrative example - not a personal tax calculation

Assume a landlord receives £24,000 of rent, has £4,000 of other allowable property expenses and £8,000 of qualifying residential finance costs.

• The property profit is worked out as £20,000 (£24,000 less £4,000), before the restricted finance costs.
• In a simple case where all of the statutory limits allow it, the possible basic-rate reduction would be £1,600 (20% of £8,000).

This does not mean every landlord’s tax bill is £1,600 lower, or that a higher-rate taxpayer pays one fixed extra amount. The result depends on the three limits above, losses, allowances, other income, the applicable tax rates and the person’s wider circumstances.

What happens to finance costs that cannot be used this year?

If the calculation limits the current-year reduction, the unused qualifying amount may be carried forward. HMRC’s property-return guidance says an unrelieved balance can be carried forward to a future year of the same property business. It is not the same as a property-business loss and it cannot simply be set against salary or other income.

Former furnished holiday lettings: a material change from 2025

The Furnished Holiday Lettings tax regime ended for Income Tax and Capital Gains Tax from 6 April 2025. Former FHL income is generally now brought into the normal UK or overseas property-business rules. For an individual, that means the residential finance-cost restriction can be relevant where it was not under the former FHL rules.

This guide does not cover the separate transition, capital-allowance, company-tax or gains consequences of the FHL abolition. Check current HMRC guidance and take advice for a former FHL business.

Records and reporting

Keep clear records of rent, expenses, finance costs, loan purpose, any mixed-use split and amounts carried forward. HMRC says tax records generally need to be kept for at least five years after the 31 January Self Assessment filing deadline for the relevant tax year.

For the relevant Self Assessment year, check the current UK Property pages or online return fields for residential finance costs and unused amounts brought forward; box numbering can change. If you have qualifying income above the relevant threshold, also check the Making Tax Digital guide for landlords for the current digital-record and reporting timetable.

Questions landlords commonly ask

Is mortgage interest still tax deductible for landlords?

For a residential property business within the restriction, qualifying finance costs are not deducted in calculating taxable property profit. A basic-rate tax reduction may instead be available, subject to the statutory limits.

Does Section 24 apply to limited companies?

No. UK-resident and non-UK-resident companies are outside this particular Income Tax restriction. That is not, by itself, a reason to incorporate: a company structure has wider tax, lending, legal and commercial implications.

Does it apply to a buy-to-let partnership?

It can. The restriction is not automatically avoided by using a partnership; an individual partner’s relevant share can be within scope.

Does it apply to every property loan?

No. It concerns qualifying finance costs of borrowing that is related to a residential property business. Private borrowing, capital repayments and non-residential elements have different treatment. Mixed borrowing may need apportionment.

Can I use a Section 24 calculator to decide whether to incorporate?

Not safely. A reliable decision would need to consider the full tax, legal, finance, transaction-cost and personal-circumstance picture. A simple finance-cost example cannot provide that answer.

Plan the wider letting business, not just one tax line

Before a purchase or refinance, consider the finance structure and the property’s likely income together with tax. The buy-to-let finance guide covers borrowing considerations, while the rental-yield calculator provides a separate starting point for assessing gross yield. If you are still at the buying stage, the additional-property SDLT calculator and guide explains its own limited England and Northern Ireland scope. For a route through the wider topic, visit the Landlord Tax and Finance hub.

Official sources

• GOV.UK: Work out your rental income when you let property
• GOV.UK: Tax relief for residential landlords - how it is worked out
• HMRC Property Income Manual: restriction introduction
• HMRC Property Income Manual: restriction calculation
• HMRC Property Income Manual: repeal of the Furnished Holiday Lettings rules