Mortgage interest tax relief for landlords: Section 24 and the 20% credit that replaced it

In the UK, Section 24 is an income tax restriction for individual landlords, so the core rule applies in England, Wales, Scotland and Northern Ireland. The main exception is rate mechanics: Scottish landlords’ reducer is still worked out using the rest-of-UK basic rate, while Finance Act 2026 changes the property basic-rate position from 2027-28 for England and Northern Ireland, with Wales given a separate power.

Can landlords still claim tax relief on mortgage interest?

Landlords can still get mortgage interest tax relief on rented residential property, but individual landlords can no longer deduct that interest from rental income; since 2020-21 it normally gives a basic-rate tax reduction instead. The statutory rule is blunt: “In calculating the profits of a property business for income tax purposes for the tax year 2020-21 or any subsequent tax year, no deduction is allowed for costs of a dwelling-related loan.” That is the Section 24 tax relief change behind most HMRC mortgage interest tax relief questions: you may still enter residential finance costs on the return, but they do not reduce taxable rental profit in the old way. Higher-rate and additional-rate landlords therefore pay tax on rental income before mortgage interest and then receive only the reducer. The market has responded accordingly: Hamptons reported that “around three‑quarters of new buy‑to‑let purchases are made through limited companies,” because companies are outside this restriction.

When did tax relief on mortgage interest stop?

Full tax relief on mortgage interest for individual residential landlords stopped in stages from 6 April 2017 and was fully removed from the profit calculation from the 2020-21 tax year. The start date is HMRC’s own commencement wording: “This measure will have effect for finance costs incurred on or after 6 April 2017.” The end point is the legislation for 2020-21 onwards: “no deduction is allowed for costs of a dwelling-related loan.” So the answer to when tax relief on mortgages stopped depends on which stage you mean: Section 24 came into effect for finance costs from 6 April 2017, but the old 100% deduction had gone completely by 2020-21. What replaced it was not no relief at all, but a tax reducer normally calculated at the basic rate rather than at the landlord’s marginal rate.

How is the 20% mortgage interest credit worked out?

From 2027-28 the mortgage interest credit is no longer always a 20% figure: Finance Act 2026 sets a “property basic rate” of 22% for England and Northern Ireland, while Scotland is not brought into that change and Wales has its own Welsh property-rate clause. Until then, the familiar landlord calculation is the 20% reducer: HMRC describes it as “20% of the lower of the” relevant finance costs, property business profits, and income above the personal allowance. The legislation expresses the cap by saying the amount relieved is “the lower of” the relevant amounts, so the credit is not simply 20% of every pound of mortgage interest in every case. If the limiting figure is £45,000 of finance costs, the credit is £9,000; if profits or taxable income are lower, the reducer is capped and the unused element may be carried forward.

How much does Section 24 actually add to your tax bill?

Section 24 usually adds roughly your marginal tax rate minus the reducer rate, multiplied by the residential mortgage interest that used to be deducted, subject to the statutory caps. HMRC’s summary is the cleanest explanation: “The net effect of these changes is that interest and finance costs are relievable only at the basic rate of tax rather than at a customer's highest rates.” A 40% taxpayer with £10,000 of mortgage interest is therefore commonly £2,000 worse off than under full deduction: the old relief was worth £4,000, the 20% reducer is worth £2,000. A 45% taxpayer is commonly £2,500 worse off on the same interest. Scotland can be sharper because Scottish higher rates differ; MoneySCOT gives the example that “On £15,000 of annual interest, that's £3,300 of extra tax a Scottish landlord pays compared to the pre-2017 rules.”

What happens to finance costs you couldn't use this year?

Unused residential property finance costs are carried forward into the next tax year for the same property business; they are not refunded as cash and they do not become an ordinary expense deduction. The legislation calls the unused balance “the individual's brought-forward amount for the following tax year in respect of the property business concerned.” In practice, that means unused residential property finance costs brought forward can be used only in a later year when the same property business has enough adjusted profits and income capacity to absorb the reducer. There is no statutory expiry date in the finance-cost carry-forward rule itself, so the balance can keep rolling until there is enough capacity or the property business ends. Keep the figure separately from current-year mortgage interest, because Self Assessment asks for the two amounts in different places.

Where do you put mortgage interest on your Self Assessment return?

On the SA105 UK property pages, current-year residential mortgage interest and other residential finance costs go in box 44, and unused residential property finance costs brought forward go in box 45. HMRC’s SA105 notes say: “Put the amount of any costs, interest and alternative finance payments in box 44.” The same notes then say: “Put any unused residential property finance costs from this property business from earlier years in box 45.” Do not put residential mortgage interest in the ordinary loan-interest or commercial-finance expense box, because that treats it as a deduction from rental profit rather than as a restricted residential finance-cost reducer. Abodient can hold the mortgage and finance-cost figures against each property and tenancy period, which matters because the Self Assessment entry depends on separating current-year residential finance costs from unused costs brought forward.

Can you claim mortgage interest while the property is empty between tenants?

You can still claim residential finance-cost relief for mortgage interest while a rental property is empty between tenants, provided you are genuinely trying to let it and are not using it privately. HMRC states the point directly: “You don't have to split the interest if the customer is genuinely trying to let the property but it is empty because they have not been able to find a tenant.” So if a property sat empty for three months between tenants, the mortgage interest and normal running costs for that void period can still belong to the letting business, even though there was no rent for those months. The dividing line is purpose: a genuine void in an ongoing rental business is different from keeping the property empty for personal use, renovation for private sale, or occupation by the owner or their family. A tenancy record showing exactly when each let started and ended — the kind Abodient keeps automatically — is useful evidence of a genuine gap between tenancies if HMRC later queries whether the letting business was ongoing during a void.

Can you deduct mortgage interest on a second home?

You cannot claim mortgage interest relief on a privately used second home, but a second home that is genuinely let as residential rental property is treated like any other buy-to-let and is subject to Section 24. HMRC’s business-purpose line is simple: “A customer cannot, for example, deduct interest on a private loan, such as a loan used to buy their private residence.” That means a holiday home, weekend home or family-use second property gets no rental mortgage interest relief at all if it is not part of a property business. If the second home is let to tenants, there is no special second-home carve-out: from 2020-21 the same statutory rule applies that “no deduction is allowed for costs of a dwelling-related loan,” with relief instead given through the residential finance-cost reducer.

Does the restriction apply to commercial property?

Section 24 does not apply to loans used wholly for commercial property, because the restriction is aimed at dwelling-related loans for residential property businesses. HMRC says: “Loans which are wholly for commercial properties, or for properties which are used for a furnished holiday letting business (see PIM4100) are not affected.” The statutory gateway is residential: the loan must be referable to “land consisting of a dwelling-house or part of a dwelling-house.” So a purely commercial unit, office, shop, warehouse or industrial building remains outside the residential mortgage interest restriction, and ordinary business interest deductibility is not replaced by the 20% reducer. Mixed-use property needs apportionment: the commercial part is not caught in the same way, but borrowing referable to a dwelling can be within Section 24.

Can you claim mortgage interest relief on an overseas property?

UK-resident individual landlords can claim residential finance-cost relief on overseas rental property, but overseas residential mortgage interest is restricted in the same way as UK residential mortgage interest rather than deducted in full. Overseas letting is its own tax category: the legislation says “A person's overseas property business consists of—” and then deals with overseas land and property separately from a UK property business. HMRC also makes clear that residential finance-cost relief can exist for overseas property businesses, because it says a person using the Foreign Income and Gains regime “may not claim relief for residential finance costs in respect of their overseas property business in that tax year.” In ordinary cases outside that FIG exclusion, the practical result is a basic-rate reducer for overseas residential finance costs, with the overseas property business tracked separately from the UK property business.

Does Section 24 apply to holiday lets and serviced accommodation?

Section 24 now applies to ordinary holiday lets and most self-catering or Airbnb-style serviced accommodation run as property letting, because the furnished holiday lettings carve-out ended for income tax from 6 April 2025. Before abolition, the legislation excluded borrowing referable to “the commercial letting of furnished holiday accommodation,” but HMRC now says: “The furnished holiday lettings rules cease to apply in tax years commencing on or after 6 April 2025 for Income Tax and for Capital Gains Tax, and 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains.” The label serviced accommodation is not itself a tax category. HMRC says hotels and guest houses are different because “Profits from running hotels and guest houses are taxed under the rules for trades and are not part of a property business,” but it also says a letting activity is a trade only where services go beyond those usually provided by a landlord.

Does Section 24 apply to limited companies?

Section 24 does not apply to limited companies, so a company landlord can generally deduct mortgage interest under the company tax rules rather than receive only the residential finance-cost reducer. The legislation switches the restriction off for companies: “Subsections (1) to (4) do not apply in relation to calculating the profits of a property business for the purposes of charging a company to income tax on so much of those profits as accrue to it otherwise than in a fiduciary or representative capacity.” HMRC says the same thing more plainly: “Companies carrying on property business are not affected.” A rent-to-rent operator running serviced accommodation through a limited company is not restricted by Section 24 on a mortgage it does not hold; if anyone is affected, it is the individual property owner with dwelling-related borrowing. Companies may face separate corporate interest restriction rules only at much larger scale: over £2 million net interest and financing costs in 12 months.

How do you reduce or get round Section 24?

You reduce Section 24 mainly by changing the ownership or tax profile of the rental business, not by relabelling residential mortgage interest: companies are outside the restriction, lower-rate spouses may reduce the marginal-rate gap, and genuine incorporation can defer some capital gains tax only if the statutory conditions are met. The company route is real because the legislation says the individual restriction “do[es] not apply” when calculating a company’s property business profits. Incorporation is not a magic switch: TCGA 1992 s.162 applies where a person “transfers to a company a business as a going concern” in exchange for shares, and from 6 April 2026 Finance Act 2026 requires that “the person makes a claim” by the statutory deadline, so CGT deferral is no longer automatic. The old holiday-let route has gone because HMRC says the furnished holiday lettings rules cease from April 2025. The cleanest planning is usually before buying, not after the mortgage and ownership are already fixed.

Will Section 24 be reversed?

Section 24 is not being reversed; the legislated direction is the opposite, because the linked property basic-rate reducer rises to 22% from 2027-28 for England and Northern Ireland rather than restoring full mortgage interest deduction. Finance Act 2026 states that “the property basic rate is 22%,” and the same Act gives Wales a separate Welsh property-rate clause instead of automatically folding it into that 22% change. Scotland is outside that specific property-rate change and continues to use the rest-of-UK basic-rate mechanism for the reducer. No UK Act has repealed the Section 24 restriction, and landlord-facing political commentary now treats repeal as unlikely rather than imminent. The practical conclusion is that 2025 and 2026 tax planning should assume the restriction remains: individual landlords are taxed on rental profit before residential finance costs, then receive only the reducer allowed by the statutory calculation.

Last reviewed August 2026.

Sources

• ITTOIA 2005 s.272A — “In calculating the profits of a property business for income tax purposes for the tax year 2020-21 or any subsequent tax year, no deduction is allowed for costs of a dwelling-related loan.” Source
• GOV.UK, Restricting finance cost relief for individual landlords — “This measure will have effect for finance costs incurred on or after 6 April 2017.” Source
• Scottish Government, Scottish Budget 2025 to 2026 — “Responsibility for the remainder of the Income Tax system, which includes all reliefs and exemptions, as well as setting the UK‑wide Personal Allowance and its associated taper rate, are reserved to the UK Parliament.” Source
• Hamptons, Record number of buy-to-let companies set up in 2025 — “Today, around three‑quarters of new buy‑to‑let purchases are made through limited companies, with rising numbers also reflecting landlords transferring existing portfolios out of personal ownership.” Source
• ITTOIA 2005 s.274AA — “In respect of a relievable amount, the actual amount on which relief for the year is to be given is (subject to subsection (3)) the amount (“L”) that is the lower of—” Source
• GOV.UK, Restricting finance cost relief for individual landlords — “In practice this tax reduction will be calculated as 20% of the lower of the:” Source
• Property Tax Partners, Section 24 case study — “The binding figure is the £45,000 of finance costs, so the credit is 20% × £45,000 = £9,000.” Source
• Finance Act 2026 s.7 — “(a)the property basic rate is 22%,” Source
• Finance Act 2026 s.6 — “section 11CB (income charged at the Welsh property basic, higher and additional rates: individuals),” Source
• GOV.UK technical note, Change to tax rates for property, savings and dividend income — “The separate rates of tax on property income will apply to England, Wales and Northern Ireland.” Source
• HMRC Property Income Manual PIM2052 — “The net effect of these changes is that interest and finance costs are relievable only at the basic rate of tax rather than at a customer's highest rates.” Source
• MoneySCOT, Section 24 Scotland — “On £15,000 of annual interest, that's £3,300 of extra tax a Scottish landlord pays compared to the pre-2017 rules.” Source
• ITTOIA 2005 s.274AA — “the difference is the individual's brought-forward amount for the following tax year in respect of the property business concerned.” Source
• HMRC SA105 notes 2025 — “Put the amount of any costs, interest and alternative finance payments in box 44.” Source
• HMRC SA105 notes 2025 — “Put any unused residential property finance costs from this property business from earlier years in box 45.” Source
• Property Tax Partners, SA105 property income form guide — “Do not put residential mortgage interest in box 26.” Source
• HMRC Property Income Manual PIM2052 — “You don't have to split the interest if the customer is genuinely trying to let the property but it is empty because they have not been able to find a tenant.” Source
• HMRC Property Income Manual PIM2052 — “A customer cannot, for example, deduct interest on a private loan, such as a loan used to buy their private residence.” Source
• ITTOIA 2005 s.272B — “(a)land consisting of a dwelling-house or part of a dwelling-house, or” Source
• HMRC Property Income Manual PIM2054 — “Loans which are wholly for commercial properties, or for properties which are used for a furnished holiday letting business (see PIM4100) are not affected.” Source
• ITTOIA 2005 s.265 — “A person's overseas property business consists of—” Source
• HMRC Property Income Manual PIM2054 — “A person who makes a claim to relief under the FIG regime (see PIM4702) may not claim relief for residential finance costs in respect of their overseas property business in that tax year and the carried forward relievable amount of their overseas property business is treated as nil.” Source
• Finance (No.2) Act 2015 s.24 — “An amount borrowed for purposes of a property business is not a dwelling-related loan so far as the amount is referable (on a just and reasonable apportionment) to so much of the property business as consists of the commercial letting of furnished holiday accommodation.” Source
• HMRC Property Income Manual PIM2054 — “The furnished holiday lettings rules cease to apply in tax years commencing on or after 6 April 2025 for Income Tax and for Capital Gains Tax, and 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains.” Source
• HMRC Property Income Manual PIM4300 — “Profits from running hotels and guest houses are taxed under the rules for trades and are not part of a property business.” Source
• HMRC Property Income Manual PIM4300 — “The whole letting activity will only constitute a trade where the owner remains in occupation of the property and provides services over and above those usually provided by a landlord.” Source
• HMRC Property Income Manual PIM2054 — “Companies carrying on property business are not affected.” Source
• GOV.UK, Corporate Interest Restriction — “This Corporate Interest Restriction only applies to individual companies or groups of companies that have net interest and financing costs of over £2 million in a 12-month period.” Source
• TCGA 1992 s.162 — “This section shall apply for the purposes of this Act where a person who is not a company transfers to a company a business as a going concern, together with the whole assets of the business, or together with the whole of those assets other than cash, and the business is so transferred wholly or partly in exchange for shares issued by the company to the person transferring the business.” Source
• Finance Act 2026 s.39 — “(b)the person makes a claim in respect of the transfer, including such information as the Commissioners may require, on or before the first anniversary of the 31 January following the tax year in which the transfer of the business took place.” Source