Section 24 of the Finance (No. 2) Act 2015 — fully phased in since the 2020/21 tax year — stops individual buy-to-let landlords deducting mortgage interest and other finance costs as a business expense. Instead, Income Tax is charged on the full rental profit before interest, and a 20% basic-rate tax credit is applied to the finance costs afterwards. This calculator works out your taxable rental profit, the tax due on it at your marginal rate(s), and your net tax after the 20% finance cost credit — then compares it against what you'd have paid under the old pre-2020 rules, where mortgage interest was fully deductible, so you can see exactly how much extra tax Section 24 is costing you. It applies to individual landlords only — furnished holiday lets (since the FHL regime was abolished from April 2025) and limited company landlords are taxed differently and are not covered by this restriction.
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Section 24 affects individual landlords who let residential property and pay mortgage interest or other finance costs on it. Instead of deducting those costs from your rental income before tax, you're taxed on the full rental profit and then given a 20% tax credit on the finance costs — a mechanism that can cost higher and additional-rate taxpayers significantly more than the old rules did.
Based on your rental income, expenses, mortgage interest and other income, the calculator works out your taxable rental profit under the new rules, applies the current UK Income Tax bands (including the Personal Allowance taper above £100,000) to find the tax attributable to that profit, then deducts a 20% finance cost tax credit. It separately works out what you'd have paid under the pre-2020 rules, where interest was simply deducted from profit, so you can see the exact extra cost of Section 24.
Your calculation summary will appear here once you enter your figures.
This is a simplified model for an individual landlord with no other property income or reliefs. Furnished holiday lets (where the pre-April 2025 qualifying tests applied) and limited company landlords are taxed differently and are not affected by Section 24 in the way described here. The Personal Allowance taper, multiple income sources, and the carry-forward of unused finance cost relief can get genuinely complex — always confirm your exact position with a qualified accountant before relying on these figures.
Section 24 of the Finance (No. 2) Act 2015 is the UK tax rule that stops individual landlords deducting mortgage interest, and other finance costs, from their rental income before working out the Income Tax they owe. It only applies to individual landlords who own residential property personally (including most partnerships and many trusts) — it does not apply to furnished holiday lettings under the old qualifying regime, or to properties owned through a limited company, which are taxed under Corporation Tax rules instead.
Before Section 24, a landlord simply added up their rent, subtracted every allowable expense — including mortgage interest — and paid Income Tax on whatever profit was left. Section 24 changed the mechanics so that mortgage interest is dealt with after tax is calculated, not before, via a tax credit instead of a deduction.
The restriction was introduced gradually over four tax years so landlords could adjust: in 2017/18, 75% of finance costs were still deductible as a normal expense (with the remaining 25% getting the new 20% credit instead); this fell to 50% deductible in 2018/19, 25% deductible in 2019/20, and from 2020/21 onward, 0% of finance costs are deductible — the restriction has been fully in effect, unchanged, in every tax year since, including 2026/27.
The government's stated aim was to reduce the tax advantage that highly-leveraged buy-to-let investing had over owner-occupation and over less-geared forms of investment. Before 2017, a higher-rate taxpayer with a large mortgage could claim interest relief at 40% or 45%, while a basic-rate taxpayer (or an owner-occupier, who gets no mortgage interest relief at all) could not. Capping relief at a flat 20% for everyone was intended to level that playing field and cool demand for debt-funded buy-to-let purchases, particularly among higher and additional-rate taxpayers.
Rather than a simple deduction, Section 24 works in two separate steps:
This two-step approach is why Section 24 behaves so differently from a normal expense deduction — it changes when and how interest relief is given, not just how much of it you get.
Under the old (pre-2020) rules, a landlord paying tax at 40% on a profit after deducting mortgage interest effectively got interest relief at 40% — a £10,000 interest bill saved £4,000 in tax. Under Section 24, that same landlord is taxed at 40% on the profit before interest, then gets back only 20% of the interest as a credit — the same £10,000 interest bill now only saves £2,000. The difference, £2,000 in this example, is pure extra tax caused purely by the change in mechanism, with the landlord's actual cash position unchanged.
For a basic-rate (20%) taxpayer whose rental profit stays entirely within the basic-rate band, the old and new rules land in almost the same place, because 20% relief and a 20% tax rate roughly cancel out. The real cost of Section 24 falls almost entirely on higher-rate and additional-rate taxpayers, and on anyone it pushes into a higher band.
Because your full rental income (minus non-finance expenses) counts as taxable profit — and also counts toward your total income for band purposes — a landlord can be pushed from the basic-rate band into the higher-rate band, or from the higher-rate band into losing their Personal Allowance, purely because of how the rules now count mortgage interest. This is sometimes called "phantom profit": tax is charged as if the landlord kept all the rent, when in reality a large slice of it went straight out the door as mortgage interest.
The practical effect is that a landlord's taxable rental profit can look much higher than their real cash profit, and that taxable figure is what decides which tax band — and which rate of relief — applies, not the landlord's actual bank balance.
Consider a landlord with £45,000 of other income (comfortably within the basic-rate band, which runs up to £50,270), £20,000 of rental income, £2,000 of other allowable expenses, and £13,000 of mortgage interest. Under the old rules, their taxable rental profit would have been £20,000 − £2,000 − £13,000 = £5,000, taking their combined income to £50,000 — still entirely within the basic-rate band. Under the new rules, their taxable rental profit is £20,000 − £2,000 = £18,000 (interest isn't deducted), taking their combined income to £63,000 — over £12,700 of which now falls into the 40% higher-rate band. Their real cash profit (rent minus all outgoings including interest) hasn't changed, but their tax bill has risen sharply, because the figure HMRC taxes has changed completely.
Two groups fall outside the restriction entirely:
Your tax-free Personal Allowance (£12,570 for 2026/27) is reduced by £1 for every £2 your total income exceeds £100,000, reaching £0 once income hits £125,140. Because Section 24 counts your full rental profit (not the amount left after interest) toward that total income figure, a landlord can lose some or all of their Personal Allowance purely because of mortgage interest that, under the old rules, would never have counted as income in the first place. Losing the Personal Allowance in this £100,000–£125,140 band creates a notorious effective marginal rate of 60% on income in that range, on top of whatever Section 24 is already costing on the finance costs themselves.
The 20% finance cost tax credit can only reduce your property-related tax bill — it can't create a refund, and it can't be used against tax on your other income. If your finance costs are large relative to your rental profit (for example, in a year with low rental income or high repair costs), some of the 20% credit may go unused. HMRC lets you carry that unused amount forward to set against property income tax in future tax years, rather than losing it outright — but it is tied up until you have enough property profit to use it against, which is a real cash-flow consideration for highly-geared landlords.
Finance costs restricted by Section 24 include mortgage interest, interest on loans used to buy furnishings for a let property, and fees incurred when taking out or repaying a mortgage or loan secured on the property (such as arrangement fees). They do not include mortgage capital repayments, which were never an allowable expense. Everyday running costs — letting agent and management fees, repairs and maintenance, landlord insurance, ground rent and service charges, and similar — sit entirely outside Section 24 and remain fully deductible before tax, exactly as before.
Because companies deduct mortgage interest in full against Corporation Tax, moving a portfolio into a limited company structure is a planning option many higher-rate landlords look into. It is not a simple or universally beneficial move: transferring existing properties into a company is normally treated as a sale for tax purposes, which can trigger Capital Gains Tax for the landlord and Stamp Duty Land Tax (or the Welsh/Scottish equivalents) for the company, and running a company brings its own ongoing costs, different rules for extracting profit (dividends and salary rather than simply drawing rent), and mortgage products for limited companies that aren't always as competitive as personal buy-to-let rates. This is a significant, portfolio-specific decision that should be made with a qualified accountant, not from a general calculator.
This calculator uses a simplified, single-property model and the standard UK Income Tax bands for an individual with no other reliefs, savings income, dividend income, or student loan considerations. Real-world tax returns often involve multiple properties — including HMOs, which have their own yield and cost structure — jointly-owned property split unevenly between partners, Gift Aid or pension contributions that affect your band thresholds, and other income sources that interact with each other in ways a simple calculator can't fully capture. Use the figures here as a planning guide, and confirm your exact Self Assessment position with a qualified accountant, particularly if you're close to the £50,270, £100,000 or £125,140 thresholds where small changes in profit can have an outsized effect on your tax bill.
This calculator's rules and figures are based directly on HMRC and HM Treasury published guidance. For the primary source material, see:
If you're weighing up Section 24's impact as part of a wider buy-to-let decision, these related calculators may help: