Section 24: How Mortgage Interest Relief Works for Landlords
A plain-English explanation of Section 24 — why landlords can no longer deduct mortgage interest in full, how the 20% finance-cost tax credit works, who it hits hardest, and how it appears under MTD.
The short answer
Under Section 24, landlords can't deduct mortgage interest and other finance costs from rental income as an expense. Instead you get a tax credit worth 20% of those costs. Because your full rental income is taxed before the credit, higher-rate taxpayers pay more than under the old rules, and the change can push some landlords into a higher tax band.
Section 24 changed landlord taxation more than almost anything in the last decade — and it still confuses people. Here's the plain version.
The old way vs the new way
Before, landlords deducted mortgage interest from rental income like any other expense, so you were taxed on the profit after interest.
Under Section 24 you can't do that. Instead:
- Your full rental income (before interest) is taxed, and
- you get a tax credit worth 20% of your finance costs.
A simple example
Rent £20,000, mortgage interest £10,000, other expenses £3,000. Higher-rate (40%) taxpayer.
| Old rules | Section 24 | |
|---|---|---|
| Taxable rental profit | £7,000 | £17,000 (interest not deducted) |
| Tax at 40% | £2,800 | £6,800 |
| Less 20% finance-cost credit | – | –£2,000 |
| Tax due | £2,800 | £4,800 |
Same real profit, more tax — that's the Section 24 effect for higher-rate landlords.
Who it hits hardest
- Higher and additional-rate taxpayers — the 20% credit is worth less than their marginal rate.
- Landlords near a band threshold — counting full rent as income can push total income into the higher-rate band, or reduce the personal allowance / tax child benefit.
- Highly geared portfolios with large interest bills.
What it doesn't affect
- Basic-rate taxpayers see little direct change from the credit itself.
- Limited companies aren't caught — they deduct interest normally (with other trade-offs).
Under MTD
Your finance costs are still recorded digitally, but the relief is a credit applied at the year-end final declaration, not an expense in your quarterly updates. So quarterly figures show rent and running costs; the finance-cost adjustment lands at finalisation.
Key takeaways
- No full deduction for mortgage interest — you get a 20% tax credit.
- Higher-rate landlords pay more, and full rent counts toward your income.
- Companies aren't affected; individuals are.
- Under MTD the relief applies at the final declaration, not each quarter.
This article is general information, not tax advice. Check the finance-cost rules at gov.uk or speak to your accountant.
Frequently asked questions
What is Section 24?
The rule that removed landlords' ability to deduct mortgage interest and finance costs as an expense. It's fully in force, replacing the deduction with a basic-rate (20%) tax reduction on those costs.
Does Section 24 affect basic-rate taxpayers?
The direct 20% credit roughly matches what a basic-rate taxpayer got before. The bigger issue is that your full rental income now counts toward your total, which can tip some landlords into higher-rate tax or affect allowances, even if their real profit hasn't changed.
Does it apply to limited company landlords?
No. Section 24 applies to individuals. Companies deduct mortgage interest as a business expense normally, which is one reason some landlords hold property through a company — though that has its own costs and considerations.
How does it show up under MTD?
You still record your finance costs digitally, but the relief is applied as a tax credit at the year-end final declaration, not as an expense in your quarterly updates.
Related reading
MTD for Landlords with Multiple Properties
How Making Tax Digital works if you own several rental properties — why they combine into one property business, how quarterly updates work across a portfolio, and record-keeping tips for landlords.
Jointly Owned Property and MTD: How to Report Your Share
How landlords report jointly owned property under Making Tax Digital — splitting income and expenses, married couples and the 50/50 default, Form 17, and keeping records for your share only.
Landlord Allowable Expenses: What UK Landlords Can Claim
A plain guide to allowable expenses for UK landlords — repairs vs improvements, letting agent fees, insurance, the finance-cost rules, and what you can't claim — plus how expenses feed MTD quarterly updates.