Section 24 Mortgage Interest Restriction 2026/27
How Section 24 actually works
Since 6 April 2020, individual landlords have not been able to deduct mortgage interest and other finance costs directly from their rental profit before working out tax. Instead, you declare rent on the full gross figure, pay Income Tax on that larger number, then receive a flat 20% tax credit on your allowable finance costs to bring the bill back down. For basic-rate taxpayers this nets out to roughly the same result as before. For higher and additional-rate taxpayers it does not — the mismatch between your marginal rate and the fixed 20% credit is where the extra tax comes from.
Take a landlord with £12,000 of annual mortgage interest. Under the old rules, a 40% taxpayer could deduct the full amount, saving £4,800 in tax. Under Section 24, they instead get a 20% credit worth £2,400 — the same £12,000 in interest, but £2,400 less relief every single year.
- The credit rate is confirmed at 20% for both 2025/26 and 2026/27, rising to 22% from 6 April 2027
- Applies to individual landlords and partnerships — limited companies are exempt and continue deducting mortgage interest as a normal business expense
- Because tax is calculated on gross rental profit before the credit is applied, Section 24 can push otherwise basic-rate landlords over the £50,270 higher-rate threshold without their actual take-home rental profit increasing — often called the “phantom income” problem
Who is affected, and who is not
Section 24 applies to individual landlords, including those letting through a partnership. It does not apply to furnished holiday lets that qualified before the FHL regime was abolished in April 2025, and it does not apply to limited companies, which is why a growing number of higher-rate landlords have incorporated their portfolios in recent years — though incorporation carries its own CGT and stamp duty costs that need weighing up individually.
Working out your actual number
The quickest way to see your real Section 24 impact is to run your gross rent, mortgage interest and other costs through a calculator that applies the 20% credit correctly, rather than estimating by hand.