Section 24: how the mortgage interest restriction hits your bill

How does Section 24 actually affect my income tax bill if I have a mortgage on the property?

If you have a mortgage, Section 24 stops you deducting all finance costs from rental income and instead gives a basic-rate (20%) tax reduction on those costs. In England the restriction has been fully in force since 6 April 2020 and applies to residential property businesses. Practically that means you get a 20% tax credit equal to the lower of your finance costs, your adjusted net income, or your property profits for the year; higher‑rate and additional‑rate taxpayers typically pay more tax than they did under the old system because interest no longer reduces taxable rental profits.

My freeholder skipped the Section 20 consultation — how much of the bill can they actually make me pay?

If your freeholder failed the Section 20 consultation, the landlord’s recoverable amount is usually capped at £250 per leaseholder for qualifying works and £100 per leaseholder per year for qualifying long‑term agreements. That cap (from the Landlord and Tenant Act and the Service Charges Regulations) limits what the freeholder can recover from each leaseholder — it does not automatically stop the works from happening, and a tribunal can grant dispensation or a different outcome in specific cases. The cap is calculated per leaseholder and applies separately to qualifying works and qualifying long‑term agreements; you can challenge over‑recovery at the First‑tier Tribunal.

Can I transfer my half of a rental property to my spouse to use both our CGT allowances before we sell, or does that just delay the tax bill rather than reduce it?

Yes — a transfer between spouses or civil partners living together is normally treated as a no gain/no loss transfer, so moving your half to your spouse can genuinely let you use both annual exempt amounts when you later sell rather than merely delaying the tax. On disposal of a UK residential property any tax due must be reported and paid within 60 days of completion, and the current individual annual exempt amount is £3,000; splitting beneficial ownership before sale can therefore reduce the total CGT payable. The no gain/no loss treatment applies while you are living together; different rules can apply on separation.

Can I put a rental property in my spouse's name to reduce our combined tax bill?

Yes — transferring the property into your spouse’s name can reduce combined income tax if it shifts rental income from a higher‑rate to a lower‑rate taxpayer, because rental income is taxed on the beneficial owner. Transfers between spouses or civil partners living together are usually no gain/no loss for CGT at the point of transfer; jointly owned property is normally taxed 50:50 unless you submit a valid Form 17 to HMRC showing unequal beneficial ownership (Form 17 applies only to married couples and civil partners). Bear in mind lender consent, potential Stamp Duty Land Tax consequences if there’s consideration or debt assumption, and practical costs of changing title. In practice, many landlords simply absorb the Section 24 hit rather than transfer legal title because lender consent, SDLT and admin often outweigh the tax saving.

Does a Section 20 major-works bill on my rental flat count as a deductible repair expense against my rental income, or is it capital expenditure I can only offset against CGT later?

It depends: revenue repairs and like‑for‑like maintenance are deductible against rental income, while improvements, replacements that enhance the asset or wholesale refurbishment are capital and are not deductible — they are relevant for CGT on sale instead. The tax treatment follows the nature of the work, not the fact it arrived via a Section 20 bill; a partial roof repair may be revenue, a full roof upgrade may be capital. See our guide on what landlords can claim as expenses for practical examples and record‑keeping tips.

A Section 20 major-works bill for a new roof has landed on my leasehold buy-to-let mid-tenancy — is there any way to pass any of that cost on to my tenant?

Only if the tenancy agreement expressly makes the tenant liable for that category of cost — otherwise the Section 20 charge is payable by the leaseholder and cannot be recharged to the occupier mid‑tenancy. You must check two documents: the lease (which sets whether the leaseholder must pay the freeholder’s bill) and the tenancy agreement (which sets what costs the tenant may lawfully be charged). For assured shorthold tenancies, service charges and other recharges must be within the wording of the tenancy; if no valid clause exists you cannot simply invoice the tenant. If you want to make recharging possible in future, see our tenancy agreement checklist for clause wording and limits.

Last reviewed August 2026.