Work out your tax liability as a landlord under Section 24 rules, comparing mortgage interest relief restrictions against your rental profit.
Total rent received over the tax year
Letting agent fees, insurance, maintenance — everything except mortgage interest
Finance costs — the amount Section 24 restricts to a 20% credit
Salary or other income, used to work out which tax band your rental profit falls in
Tax under Section 24
£1,746
What you actually owe on your rental profit today
This result is an estimate only and does not constitute financial advice.
Tax under pre-2017 rules
£800
If mortgage interest were still fully deductible
This result is an estimate only and does not constitute financial advice.
Extra tax from Section 24
£946
The added cost of the finance cost restriction
This result is an estimate only and does not constitute financial advice.
Finance cost tax credit
£1,200
20% credit on your mortgage interest
This result is an estimate only and does not constitute financial advice.
Before April 2017, landlords could deduct mortgage interest from their rental income like any other business expense, only paying tax on what was left over. Section 24 of the Finance (No. 2) Act 2015 phased this out, and since the 2020/21 tax year, mortgage interest and other finance costs can no longer be deducted from rental income at all.
Instead, landlords calculate their taxable rental profit as if finance costs didn't exist, then claim a tax reducer worth 20% of those finance costs — the basic rate of tax — regardless of which band they're actually in. For basic rate taxpayers this often works out roughly the same as before, but for higher and additional-rate taxpayers, it means paying tax at 40% or 45% on income that isn't really profit, while only getting relief back at 20%.
It also inflates your taxable income for other purposes. Because the full rental income (minus non-finance expenses) counts as profit, it can push you into a higher tax band, or reduce your personal allowance if it takes your total income above £100,000, even if your actual cash profit after mortgage payments is modest.
Use the calculator above to compare what you'd owe under the old rules against what Section 24 actually costs you, and see how much of the difference comes from the rate restriction versus being pushed into a higher band.
It's the tax rule that stops landlords deducting mortgage interest and other finance costs from their rental income before working out their taxable profit. Instead, you pay tax on the full rental profit before finance costs, then get a flat 20% credit on those finance costs applied afterwards.
Higher and additional-rate taxpayers feel it most, since they only get finance cost relief at the 20% basic rate rather than at their actual 40% or 45% rate. It also affects landlords whose rental profit, once finance costs are added back in for tax purposes, pushes their total income into a higher band or above £100,000, even if their actual cash profit hasn't changed.
No — it only applies to individual landlords who own property personally. Properties held through a limited company are taxed under corporation tax rules instead, where mortgage interest remains a fully deductible business expense, which is why many landlords with larger portfolios have looked at incorporating.
No. The 20% credit can only reduce your tax bill on rental profits down to zero — it can't be used to generate a repayment or offset tax on other income. If your finance costs are large relative to your rental profit, any unused credit is generally carried forward to set against rental profits in future years.
Speak to a property tax specialist about structuring your lettings to manage the Section 24 impact.