Mortgage Interest Tax Credit (Section 24)
Quick answer
The 20% basic-rate tax credit that replaced full mortgage interest deduction for individual UK landlords under section 24 of the Finance (No.2) Act 2015. From 6 April 2020, finance costs (mortgage interest, loan interest, mortgage broker fees) are no longer deductible from rental profits; instead HMRC gives a tax reducer at the basic rate, capped at the lower of finance costs, property profits or adjusted total income after personal allowance. Higher- and additional-rate taxpayers are materially worse off than pre-2017; Limited Company landlords are unaffected because Ltd interest remains a fully deductible business expense.
At a glance
- Relief
- Basic-rate 20% tax credit, not a deduction
- Fully in force since
- April 2020
- Effect
- Tax is charged on profit before interest
- Not applicable to
- Companies, which still deduct interest as an expense
Full guide
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Open full guideWhy Mortgage Interest Tax Credit (Section 24) matters for landlords
Section 24 is the single change that reshaped buy-to-let economics, and it is widely misunderstood because it does not reduce the tax you pay so much as change the number you are taxed on. Your taxable profit is calculated **before** deducting mortgage interest, and you then receive a credit worth 20% of that interest. A higher-rate landlord therefore pays tax on income that has already gone to the lender — the reason the effect is often called phantom income. It can also push a landlord into a higher band, or over the High Income Child Benefit threshold, on money they never received. From April 2027 property income is taxed a further two points higher, which compounds it.
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Official sources
LetCompliance editorial reviews this entry every quarter against the sources above. Always confirm specific duties with a qualified solicitor or your local council.
Related terms
BTL (Buy-to-Let)
A mortgage product and business model where a property is purchased specifically to rent out. Buy-to-let landlords are subject to Section 24 of the Finance Act 2015, which replaced mortgage interest relief with a 20% tax credit. Stamp duty is higher on a second property.
Furnished Holiday Let (FHL)
A short-let property meeting the FHL availability and letting tests (210 days available, 105 days actually let, etc.). Treated as a trade for tax purposes until 5 April 2025, with full mortgage interest deduction, capital allowances on furniture and fittings, and Business Asset Disposal Relief on sale. From 6 April 2025 the FHL regime was abolished by the Finance Act 2024: existing FHLs fall under standard property income rules and Section 24 mortgage interest restriction applies in full.
Inheritance Tax (IHT)
A tax on the value of an estate on death, charged at 40% above the tax-free threshold. Rental property counts in the estate at its market value less any outstanding mortgage. The nil-rate band is £325,000, with a further residence nil-rate band potentially available when a main home passes to direct descendants.
Allowable Expenses
The day-to-day running costs a landlord can deduct from rental income before tax. They must be wholly and exclusively for the letting — letting agent fees, repairs and maintenance (not improvements), landlord insurance, ground rent and service charges, accountancy, and utility or council tax you pay. Mortgage interest is handled separately as a 20% tax credit under Section 24, not as an expense.
Buy-to-Let Mortgage
A mortgage designed for a property bought to rent out rather than live in. Lending is assessed mainly on the rent the property will produce, not just the borrower’s salary, and most are interest-only. Deposits are larger than for a residential mortgage — typically at least 20–25% — and the interest is relieved only as a 20% tax credit under Section 24.
Consent to Let
Written permission from a residential mortgage lender allowing the owner to let out a home bought on an owner-occupier mortgage, without switching to a buy-to-let product. Usually granted for a limited period (often 6–12 months) and sometimes with a rate uplift. Letting without it breaches the mortgage terms and can, in principle, let the lender demand full repayment.