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Section 24 explained

Why landlords who own property in their own name pay more tax than they used to, and why so many now buy through a company.

The short answer

Section 24 of the Finance (No. 2) Act 2015 stopped individual landlords deducting mortgage interest from rental income. Instead you get a tax credit worth the basic rate of the interest. It was phased in from April 2017 and has applied in full since April 2020. Basic-rate taxpayers are mostly unaffected. Higher-rate taxpayers pay noticeably more.

A worked example

A higher-rate taxpayer receives £12,000 rent a year, pays £6,000 mortgage interest and has £2,000 of other costs.

  • Before Section 24: profit after interest is £4,000. Tax at 40% is £1,600.
  • Now: tax is worked out on £10,000 (interest not deducted). At 40% that is £4,000, minus a 20% credit on the £6,000 interest (£1,200). Tax is £2,800.

The same property now costs £1,200 a year more in tax. Your cash profit has not changed. Section 24 can also push your total income into a higher band, which can affect child benefit and your personal allowance.

How a limited company compares

A company still deducts mortgage interest in full as a cost and pays corporation tax on what is left. In the example, the company's profit is £4,000. Taking money out of the company as dividends or salary is taxed again, so the company route usually suits landlords who keep profits in the business to buy more property. See limited company buy to let.

Moving existing properties into a company is a sale. It can trigger stamp duty and capital gains tax. Get advice from a property tax specialist before you do it.

Changes coming in April 2027

The government has announced separate, higher income tax rates for property income from April 2027, with the finance cost credit rising in line with the new basic property rate. The exact rates have been reported differently since the 2026 Budget. Check the current figures on GOV.UK before you plan.

Who Section 24 affects

  • Individuals and partnerships with residential lets, including holiday lets since April 2025.
  • Not limited companies.
  • Not commercial property.
This page explains how the rules work. It is not tax advice. Speak to an accountant about your own position.

Common questions

Does Section 24 apply to limited companies?

No. Companies deduct mortgage interest in full as a business cost.

Can unused tax credit be carried forward?

Yes. If the credit is more than the tax due on your property income in a year, the unused part can usually be carried forward to later years.

Does Section 24 affect basic-rate taxpayers?

Mostly not, unless adding the rent without deducting interest pushes your income into the higher-rate band.