How the calculation works
Section 24 of the Finance (No. 2) Act 2015 restricts finance cost relief for individual landlords. It was phased in from April 2017 and has applied in full since 6 April 2020. Your rental profit for tax is the rent less allowable running costs, with no deduction for mortgage interest. That profit is added to your other income and taxed at your normal rates. You then get a tax reduction equal to 20 percent of the lowest of three figures: your finance costs, your property profit, and your adjusted total income above the personal allowance. Any finance costs that could not be relieved are carried forward to the next year.
The calculator works out the tax twice. The first figure follows the current rules. The second is the old treatment, where interest was deducted from the rent before tax, which is how a limited company is still taxed on profit. The difference between the two is what Section 24 costs you. It uses the 2026 to 2027 personal allowance of £12,570, which falls by £1 for every £2 of income above £100,000, the basic rate band of £37,700, and the additional rate threshold of £125,140.
What changes from 6 April 2027
The Finance Act 2026 brings in separate rates for property income in England, Wales and Northern Ireland from the 2027 to 2028 tax year: a property basic rate of 22 percent, a property higher rate of 42 percent and a property additional rate of 47 percent. The finance cost credit rises to 22 percent to match. HMRC's technical note says the personal allowance is set against other income first, so more of your rent falls into the taxed bands. The government has said the personal allowance and basic rate limit stay at £12,570 and £37,700 until 5 April 2031, so the 2027 to 2028 option uses the same bands.
| Band (taxable income) | 2026 to 2027, all income | 2027 to 2028, property income |
|---|
| Personal allowance, up to £12,570 | 0 percent | 0 percent |
| Basic rate, £12,571 to £50,270 | 20 percent | 22 percent |
| Higher rate, £50,271 to £125,140 | 40 percent | 42 percent |
| Additional rate, over £125,140 | 45 percent | 47 percent |
| Credit on finance costs | 20 percent | 22 percent |
Bands and rates from GOV.UK and the HMRC technical note. The property rates apply in England, Wales and Northern Ireland; Scotland is treated separately.
This page is general information for England and is not tax advice. It ignores savings and dividend income, losses brought forward, the £1,000 property allowance, Gift Aid and pension contributions, and the High Income Child Benefit Charge. If incorporating or transferring ownership looks attractive, take advice from a qualified tax adviser first: moving a property into a company triggers stamp duty and capital gains tax.
Frequently asked questions
What is Section 24 for landlords?
It is the rule that stops individual landlords deducting mortgage interest and other finance costs from rental income. Instead you get a tax credit worth 20 percent of those costs. It has applied in full since 6 April 2020.
Does Section 24 affect basic rate taxpayers?
Usually not by much, because a 20 percent credit matches 20 percent tax. It can still cost you if adding the interest back pushes your taxable income over £50,270 into the higher rate band, or if your property profit is lower than your interest.
Can I carry forward unused finance costs?
Yes. If the credit is limited because your property profit or your income above the personal allowance is lower than your finance costs, the unrelieved amount is carried forward and added to next year's finance costs for the same property business.
Does Section 24 apply to limited companies?
No. A company deducts mortgage interest in full and pays corporation tax on what is left. Company mortgages tend to cost more and taking money out is taxed again, so the comparison depends on your figures.
Will the 2027 property rates change Section 24?
The credit rises from 20 percent to 22 percent from 6 April 2027 to match the new property basic rate, but the tax on rental profit rises by two points in every band, so most landlords pay more overall.
Sources
GOV.UK income tax rates and personal allowances, 2026 to 2027; HMRC technical note on property, savings and dividend rates, published 26 November 2025; Finance Act 2026; GOV.UK on maintaining the thresholds until 5 April 2031; GOV.UK on restricting finance cost relief for individual landlords. All checked 3 October 2026.