How does Section 24 affect landlord tax?

Section 24 restricts mortgage interest tax relief for residential landlords. Since April 2020, you can no longer deduct mortgage interest from rental income. Instead, you receive a 20% tax credit based on your mortgage interest payments. This increases your taxable profit and can push basic-rate taxpayers into the higher-rate band.

What is a good rental yield in the UK?

A gross rental yield of 5-8% is generally considered good in the UK, though this varies by region. Net yield (after all costs including tax) is what matters for cash flow. In London, yields are often 3-5%, while northern cities may achieve 7-10%.

How much stamp duty do I pay on a buy-to-let property?

Buy-to-let and second homes attract a 3% stamp duty surcharge on top of standard residential rates. For example, a £250,000 property incurs £10,000 stamp duty (3% on the first £125,000 and 5% on the remainder), compared to £2,500 for a primary residence.

What is the Capital Gains Tax rate on property in 2026/27?

For the 2026/27 tax year, Capital Gains Tax on residential property is 18% for gains falling within the basic-rate band and 24% for gains falling within the higher-rate band. The annual exempt amount is £3,000. Private Residence Relief may apply if the property was your main home.

UK Buy-to-Let Tax & Yield Calculator 2026/27

Work out your true rental profit after Section 24 mortgage interest restrictions, calculate stamp duty on purchases, estimate capital gains tax on disposal, and see your real net yield. Built for UK residential landlords.

Property Income & Costs

Rental Income

Annual Rental Income

Total rent received in the tax year (6 Apr – 5 Apr).

Current Property Value

Used to calculate gross and net yield.

Allowable Expenses

Mortgage Interest Paid

Not deductible from income since Section 24. You get a 20% tax credit instead.

Letting Agent / Management Fees

Landlord Insurance

Repairs & Maintenance

Replacements, repairs, safety certificates. Not improvements.

Other Costs (legal, accounting, void periods)

Your Tax Profile

Your Other Taxable Income (salary, etc.)

Used to determine which tax band your rental profit falls into.

Joint ownership (50/50 split with spouse)

Results

Net Annual Profit After Tax

£0.00

per year (your share if joint)

Note: Section 24 means mortgage interest is not an allowable expense. Instead you receive a 20% tax credit. This increases your taxable profit and can push you into higher tax bands.

Stamp Duty Land Tax (SDLT)

Purchase Price

Additional property / Buy-to-Let (3% surcharge applies)

First-time buyer (no surcharge, relief may apply)

Non-UK resident (2% surcharge applies)

Stamp Duty Breakdown

Total Stamp Duty Payable

£0.00

including all surcharges

2026/27 Stamp Duty Rates for Additional Properties

Property Value Band	Standard Rate	+ 3% Surcharge	Total BTL Rate
Up to £125,000	0%	3%	3%
£125,001 – £250,000	2%	3%	5%
£250,001 – £925,000	5%	3%	8%
£925,001 – £1.5m	10%	3%	13%
Over £1.5m	12%	3%	15%

Non-UK residents pay an additional 2% surcharge on top of the 3% additional property rate. First-time buyers purchasing under £425,000 pay 0% on the first £425,000 (if not an additional property).

Capital Gains Tax (Property)

Original Purchase Price

Sale Price

Selling Costs (agent, legal, staging)

Capital Improvements (extensions, new kitchen)

Not repairs — these must enhance the property's value.

Your Taxable Income This Year

Determines whether gain is taxed at 18% or 24%.

Joint ownership (split gain 50/50)

Private Residence Relief (property was your main home)

CGT Breakdown

Capital Gains Tax Payable

£0.00

your share (if joint)

2026/27 Capital Gains Tax Rates on Residential Property

Tax Band	CGT Rate (Property)	Applies To
Basic Rate taxpayer	18%	Gain falling within unused basic-rate band
Higher / Additional Rate	24%	Gain exceeding basic-rate band
Annual Exempt Amount	£3,000	Tax-free gain per individual

You must report and pay CGT on UK residential property within 60 days of completion. Letting Relief may apply if you previously lived in the property and let it out, but it is now heavily restricted.

Understanding Section 24 Mortgage Interest Restrictions

Section 24 of the Finance Act 2015 fundamentally changed how residential landlords account for mortgage interest. Before April 2017, you could deduct mortgage interest from rental income before calculating tax. Now, you receive only a 20% tax credit on your mortgage interest payments.

This has two major consequences:

Higher taxable profit: Your rental profit appears larger on paper, even though your cash flow hasn't changed.
Bracket creep: Basic-rate taxpayers with large mortgages can be pushed into the 40% Higher Rate band because the "phantom" profit inflates their total income.

For example, a landlord with £20,000 rent, £8,000 expenses and £6,000 mortgage interest used to have a taxable profit of £6,000. Under Section 24, the taxable profit is £12,000, with a £1,200 tax credit (20% of £6,000). If that landlord also earns £45,000 in salary, the extra £6,000 of "phantom" profit is taxed at 40%, not 20%.

Mitigation Strategies

Transfer to spouse: If your partner is a lower-rate taxpayer, joint ownership or full transfer can reduce the tax burden (but beware of CGT and stamp duty).
Limited Company: Buying new properties through a limited company allows full mortgage interest deduction against Corporation Tax (25%). However, extracting profits via dividends has its own tax costs.
Offset other costs: Ensure you claim every allowable expense — agent fees, insurance, repairs, safety certificates, mileage to check the property, and a portion of phone/internet costs.

How to Calculate True Net Rental Yield

Gross yield is simply annual rent divided by property value. It is useful for quick comparisons but tells you nothing about profitability.

Net yield accounts for all costs (excluding mortgage capital repayments) and gives you the real cash-on-cash return. Our calculator shows both:

Gross Yield = Annual Rent ÷ Property Value
Net Yield = (Annual Rent − All Costs − Tax) ÷ Property Value
Cash ROI = Net Profit ÷ Cash Invested (deposit + purchase costs)

A property showing 6% gross yield might only deliver 2–3% net yield after Section 24 tax, maintenance voids, and management fees. Always model the net figure before buying.

Frequently Asked Questions

Can I deduct mortgage capital repayments from rental income?

No. Only the interest portion was ever deductible, and since Section 24 even that is restricted to a 20% tax credit. Capital repayments are never an allowable expense — they reduce your loan balance, not your tax bill.

Is it better to own buy-to-let personally or through a limited company?

It depends on your tax bracket and plans. Companies pay 25% Corporation Tax but can deduct mortgage interest fully. However, extracting profits via salary or dividends triggers personal tax. For higher-rate taxpayers with several mortgaged properties, a company structure often wins. Seek advice from a property tax specialist.

What expenses can landlords claim?

Allowable expenses include: letting agent fees, landlord insurance, maintenance and repairs, safety certificates (Gas, EICR, EPC), ground rent, service charges, council tax during voids, advertising for tenants, mileage to visit the property, and a proportion of phone/internet use. You cannot claim for capital improvements (e.g., extensions) — these reduce your CGT instead.

When do I pay tax on rental income?

Rental income is declared via Self Assessment. The deadline for online filing is 31 January following the end of the tax year (5 April). If your tax bill is over £1,000, you will usually make Payments on Account on 31 January and 31 July.