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Section 24 Mortgage Interest Calculator (UK Landlords, 2026)
See exactly how much extra tax Section 24 (Finance Act 2015) costs you on your buy-to-let. Compares the old "interest deductible" regime with the current 20% basic-rate tax reducer, including the band-shift trap that pushes basic-rate landlords into higher rate.
Your wider income
Rental property (100% ownership)
Section 24 costs you £1,500 extra tax this year
Mortgage interest is no longer deductible. You only get a 20% basic-rate credit (£1,500), even though some of your rental profit is taxed at 40%.
Your numbers
- Rental profit (after expenses, before interest)
- £15,500
- Tax on rental income — old regime (interest deductible)
- £3,146
- Tax on rental income — Section 24 regime
- £4,646
- Section 24 cost vs old regime
- £1,500
- Cash kept after interest, before tax
- £8,000
- Cash kept after interest and tax
- £3,354
- Effective tax rate on rent
- 25.8%
Notes
- Uses 2025/26 + 2026/27 England & Wales tax bands (PA £12,570; basic 20% to £50,270; higher 40% to £125,140; additional 45%). Scotland has different bands.
- Section 24 (ITTOIA 2005 s.272A, inserted by Finance Act 2015) restricts mortgage interest relief to a 20% basic-rate tax reducer.
- Limited company landlords are not affected by Section 24 — interest remains a fully deductible expense for corporation tax.
- Personal allowance taper above £100,000 is included.
- You are a higher / additional rate taxpayer — the Section 24 hit is the gap between your marginal rate and the 20% credit.
- Guidance, not tax advice. Always verify with your accountant.
How Section 24 changes the maths for UK landlords in 2026
Section 24 of the Finance (No.2) Act 2015 phased out the ability for individual UK landlords to deduct mortgage interest from rental income before tax. Since April 2020 mortgage interest is no longer an allowable expense for an unincorporated landlord; instead HMRC gives a 20% basic-rate tax credit calculated on the lower of finance costs, property profits, or adjusted total income. The headline impact: higher-rate (40%) and additional-rate (45%) taxpayers effectively see only 20% relief on mortgage interest, while their gross rental income is taxed at full marginal rate.
The practical effect varies sharply by leverage. A landlord with no mortgage is unaffected. A landlord with a 75% LTV mortgage on a low-yielding London flat is the worst-case scenario: gross rental income pushes total income into the higher-rate band (which itself can pull the personal allowance taper into play above £100,000), and the 20% credit covers a tiny fraction of the actual interest cost. Many highly-leveraged London / South-East landlords moved into negative net cash flow as base rates rose between 2022 and 2024.
This calculator runs both regimes side by side using the 2026/27 income-tax bands (£12,570 personal allowance, 20% basic to £50,270, 40% higher to £125,140, 45% additional above) and the personal-allowance taper (£1 lost per £2 of adjusted income above £100,000). It shows the gap between pre-2017 rules (full deduction at marginal rate) and the current 20%-credit rules so you can see exactly how much extra tax Section 24 is costing on this property.
For a portfolio landlord the comparison usually triggers a wider question: is incorporation worth it? Holding properties through a UK Limited Company sidesteps Section 24 (interest is a fully-deductible business expense for a Ltd), but moves you into corporation tax (25% main rate from £250k profit) plus dividend tax on extraction. Below roughly £50k of property profit, personal ownership is usually still neutral or better; above it, incorporation often wins on cash-tax. Stamp Duty on property transfers and CGT on uplift make a one-off transfer expensive though — incorporation is usually a forward-only decision rather than a retrofit.
Section 24 also interacts with Mortgage Interest Relief in two non-obvious ways. First, the 20% credit is restricted by your property profits: if your property makes a loss, the unused finance cost carries forward (HMRC SA105 box 44) but cannot create a current-year refund. Second, the tax credit comes off your final tax bill, not your taxable income, so it does not affect the £100k personal-allowance taper threshold or your child-benefit High-Income Charge. A higher-rate landlord with three mortgaged BTLs can lose their personal allowance entirely without realising why — this calculator surfaces that effect.
When you run the numbers, anchor the decision on three figures: tax under old rules, tax under current rules, and effective marginal rate on the next £1 of rent. If the effective rate is above 60% (which happens in the personal-allowance taper window) the property is being taxed at a punitive rate and is a candidate for incorporation, sale, or remortgaging onto a lower-rate product. Use a tax adviser before acting — this calculator gives you the magnitude of the problem, not the legal answer.
How to calculate Section 24 mortgage interest tax for a UK landlord
Estimate your tax bill under both the pre-2017 rules and the 20% mortgage interest tax credit rules using your salary, gross rent, allowable expenses and mortgage interest.
- 1
Enter your other taxable income (salary + dividends)
Use the gross figures from your P60 or self-assessment. This determines which tax band the rental profit lands in.
- 2
Enter gross annual rent collected
Use the actual amount banked in the tax year (April 6 to April 5), not the headline asking rent. Exclude any periods of vacancy.
- 3
Enter allowable property expenses (excluding mortgage interest)
Letting agent fees, repairs and replacement of domestic items, insurance, accountancy, ground rent and service charges, but NOT capital improvements or mortgage interest itself.
- 4
Enter annual mortgage interest paid
The interest portion only — capital repayment is not deductible under either regime. Take this from the lender’s annual statement, not the monthly direct debit total.
- 5
Compare the two outputs
The calculator shows tax under pre-2017 (full deduction) vs current rules. The difference is the cost of Section 24 to you. If it is materially large, raise it with an accountant before the next 5 January.
Frequently asked questions
Is mortgage interest still deductible for landlords in 2026?
Not as a direct expense for individual landlords. Since April 2020 you receive a 20% tax credit on the lower of finance costs, property profits, or adjusted total income (after personal allowance). For higher- and additional-rate taxpayers this is a worse outcome than pre-2017 full deduction. UK Limited Company landlords can still deduct mortgage interest fully against corporation tax.
Does Section 24 apply to commercial property or holiday lets?
No. Section 24 applies to residential let property held by individuals. Furnished Holiday Lets met the trade test until April 2025, when the FHL tax regime was abolished — from 2025/26 onward, FHLs fall under Section 24 like any other residential let. Commercial property continues to allow full interest deduction.
Will I pay more tax even though my mortgage payment did not change?
Yes — because the interest portion of your mortgage is no longer reducing your taxable income, your taxable rental profit increases. You then receive a 20% tax credit at the end. If you are a higher-rate taxpayer, the gap between 40% on the gross profit and the 20% credit is the additional tax you pay. The calculator quantifies this in pounds.
Should I move my BTL portfolio into a Limited Company because of Section 24?
Sometimes — but never lightly. Incorporation can sidestep Section 24 because Ltd interest is fully deductible. However the transfer triggers Stamp Duty (3% surcharge plus standard rates) and Capital Gains Tax on any uplift since purchase, and dividend extraction adds another tax layer. Run an accountant’s incorporation analysis before acting; this calculator is a screening tool, not the answer.
What happens if my property makes a loss after Section 24?
The 20% finance-cost credit cannot generate a tax refund — it is capped at the lower of finance costs, property profits and adjusted total income (after personal allowance). Unused finance cost carries forward indefinitely (SA105 box 44) and offsets the 20% credit calculation in a future profitable year. Property losses themselves carry forward against future rental profits.
Does the 20% tax credit affect the £100,000 personal-allowance taper?
No. The credit reduces your tax bill at the end of the calculation, but the gross rental profit is included in adjusted net income. So Section 24 can push you into the £100k taper even though the post-credit tax is lower. This is one of the most punishing scenarios — effective marginal rate above 60% — and the calculator surfaces it.
Are there any landlords Section 24 does not affect?
Three groups: basic-rate taxpayers (the 20% credit roughly equals what they would have saved by deduction), Limited Company landlords (full deduction unchanged), and unmortgaged landlords (no interest, nothing to restrict). Everyone else — the typical higher-rate buy-to-let landlord — is materially worse off than pre-2017.
Same numbers, run for every property
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