Section 24 Mortgage Interest Tax Restriction for UK Residential Landlords 2026
How Section 24 restricts finance-cost relief for individual landlords of residential property, replacing the direct deduction with a basic-rate tax reduction, and how the rules differ for property companies.
Key Statutory Takeaways
Statutory Rules & Core Thresholds
0% direct deduction of residential mortgage interest from rental profit. 20% basic rate tax reduction on the lowest of finance costs, property profits, or adjusted income.
In-Depth Legal Framework & Analysis
Under Section 24 of the Finance (No. 2) Act 2015 (codified in ITTOIA 2005 sections 272A & 274A and ITA 2007 section 274AA), individual landlords of residential property are prohibited from deducting mortgage interest and other finance costs when computing net property business profits. Instead, tax relief is given as a tax reduction equal to 20% of the lowest of the relevant finance costs, property business profits (after brought-forward losses), and adjusted total income above the Personal Allowance. By taxing gross property profits before financing costs, landlords with significant gearing are frequently pushed into higher (40%) or additional (45%) tax brackets and risk having their Personal Allowance tapered above £100,000.
Failure to report or improper deduction of residential finance costs triggers HMRC Self Assessment enquiries, backdated tax assessments, statutory late payment interest, and penalties.
Reporting Section 24 Finance Costs
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Frequently Asked Questions: Section 24 Mortgage Interest Tax Restriction for UK Residential Landlords 2026
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Primary Statutory Authority
Frequently Asked Questions
Section 24 restricts the Income Tax relief available to individual landlords for finance costs on residential property. Since 2020/21, qualifying mortgage interest and other finance costs are not deducted directly from rental income when calculating property profits. Instead, a basic-rate tax reduction, generally at 20%, is calculated subject to statutory limits.
Not necessarily. The tax reduction is generally 20% of the lowest of the relevant finance costs, property business profits after applicable losses and adjusted total income above the Personal Allowance. Unused qualifying finance costs can generally be carried forward.
Mortgage interest is no longer deducted before calculating taxable property income. The landlord instead receives relief at the basic 20% rate, so a landlord whose marginal tax rate is 40% or 45% may receive less relief for financing costs than under the former deduction system.
Yes. Qualifying residential finance costs that cannot be fully relieved in the current year can generally be carried forward and used in later years, subject to the statutory tax-reduction limits.
The individual Section 24 tax-reducer mechanism does not apply to companies in the same way. A company within Corporation Tax generally deals with qualifying interest under the loan-relationship rules. However, Corporate Interest Restriction and other Corporation Tax rules can limit the amount ultimately deductible.
Potentially, yes. A non-UK resident individual can still be subject to the residential property finance-cost restriction when the UK Income Tax rules apply to their UK residential property business. Non-UK residence does not by itself remove the restriction.
Common Taxpayer Misconceptions
✓ Rule: The tax reduction is 20% of the lowest of finance costs, property profits, and adjusted total income. If property profits are zero or negative, the reducer is capped and carried forward.
✓ Rule: Company interest is governed by Corporation Tax loan relationship rules and remains subject to the Corporate Interest Restriction (CIR) for large financing costs.
✓ Rule: Non-UK resident individual landlords letting UK residential property are subject to UK Income Tax and the Section 24 finance cost restriction.
✓ Rule: Unused finance costs are carried forward indefinitely to reduce income tax liabilities in future tax years with sufficient property profits.