Section 24 in plain English: what individual landlords can still claim in 2026

Section 24 is the most argued-about piece of UK property tax legislation of the last decade. It came in for individual landlords from April 2017 and was fully in force by 2020/21. Six years on, plenty of landlords are still calculating their tax the old way and getting a nasty surprise when the return is filed.

This post explains what Section 24 actually does, why higher-rate landlords are hit hardest, and the position for limited companies.

What changed, in one paragraph

Before April 2017, individual landlords deducted mortgage interest from rental income before calculating tax. Section 24 of the Finance (No. 2) Act 2015 phased that out over four years. From the 2020/21 tax year onwards, the full rent is included in taxable income with no interest deduction, and a tax credit of 20 per cent of the interest is given at the end of the calculation.

Why higher-rate landlords lose out

Worked example. Sarah owns one buy-to-let. Rent is £18,000 a year. Mortgage interest is £9,000. She has £60,000 of salary already, so the rental profit sits in the higher-rate band.

Old rules: taxable rental profit was £9,000 (£18,000 rent minus £9,000 interest), tax at 40 per cent was £3,600.

Section 24 rules: the full £18,000 rent is taxable at 40 per cent, which is £7,200. Then she receives a 20 per cent credit on the £9,000 of interest, which is £1,800. Net tax: £5,400. That is £1,800 more tax on the same property than under the old rules. The cash position has not changed but the bill has.

Push the same example into the additional-rate band (45 per cent income above £125,140 in 2026/27) and the gap is wider again.

What still works for individual landlords

Section 24 only restricts finance costs. Other allowable expenses are unchanged:

• Letting agent fees, advertising, accountancy fees on the rental business
• Repairs and maintenance (not improvements; that is a capital question)
• Insurance premiums on the property and contents
• Ground rent and service charges
• Council tax and utilities you pay between tenancies
• Mileage at HMRC approved rates for property visits
• Replacement of domestic items (kitchen white goods, sofas) under the Replacement of Domestic Items relief, not the old wear-and-tear allowance

Limited companies are different

Property businesses run through a UK limited company are outside Section 24. They deduct mortgage interest from rental profit before calculating corporation tax, just like any other trading expense. Corporation tax is currently 25 per cent on profits above £250,000 with a 19 per cent small profits rate up to £50,000 and marginal relief in between.

That is why incorporation gets pitched so heavily on landlord forums. The maths can work, but it is rarely as clean as the headline suggests. Stamp duty on the transfer, capital gains on the disposal to the company, mortgage refinancing, and the eventual cost of extracting cash from the company all need to be in the model. For a single property held by a basic-rate taxpayer, incorporation usually loses on the maths once those costs are in.

Three opinions, since this post is from a small firm

Section 24 is settled law and is not going anywhere. The energy spent online complaining about it would be better spent on actually modelling the post-tax return on each property.

Incorporation is not a silver bullet. It is the right move in some specific situations, mostly involving higher-rate taxpayers holding several properties with growing equity and a long hold horizon. For others it is a tax on activity that does not pay back.

The most underrated planning move for individual landlords is the spousal split. Putting all or part of a property into the lower-earning spouse's name shifts rent into a lower tax band. Done with paperwork, this is straightforward; done verbally and not documented, it does not work.

Does Section 24 affect commercial property?

No. The restriction applies to residential property only. Commercial landlords still deduct interest as a normal business expense.

What about a partnership of two landlords?

Partnerships of individuals are treated as individuals for these rules; Section 24 applies to each partner's share. Limited liability partnerships are the same. Only a UK limited company is outside the restriction.

Can I switch existing buy-to-lets into a company to escape Section 24?

You can, but it is a disposal for capital gains tax purposes and an acquisition for stamp duty. Incorporation relief (TCGA s162) can defer the gain in certain circumstances if the property activity meets the definition of a business. SDLT relief on partnership incorporation is also possible in some cases. Get the modelling done before transferring anything; the planning here is technical.