Section 24 Landlord Tax Calculator

Use the Section 24 calculator

Enter your annual rental income, your mortgage (and other finance) interest, and your other allowable expenses in the tool above. It estimates your taxable rental profit, the tax due at your marginal rate, the 20% finance-cost tax reducer, and the net tax you actually pay. If you also have a salary or other income, add it so the calculator can apply the right tax band.

How the Section 24 mortgage interest restriction works

Before April 2017, a landlord deducted 100% of mortgage interest from rental income before tax, like any other business cost. Section 24 of the Finance (No. 2) Act 2015 phased that out between 2017 and 2020. From the 2020/21 tax year onwards, finance costs are not an allowable expense against rental profit at all. You instead receive a basic-rate (20%) tax reducer equal to 20% of your finance costs.

The plain-English formula the calculator uses is:

• Taxable rental profit = rental income − allowable expenses (but not mortgage interest)
• Income tax on rental profit = taxable rental profit × your marginal rate (20%, 40% or 45%)
• Finance-cost tax reducer = 20% × finance costs
• Net rental tax = income tax on rental profit − finance-cost tax reducer

The tax reducer is technically capped at 20% of the lowest of three figures: your finance costs, your rental profits, or your adjusted total income above the Personal Allowance. For most landlords with healthy profits the cap doesn't bite, but it matters in a loss-making or low-income year, where unused relief is carried forward to future years.

This is why basic-rate landlords are broadly unaffected: 20% tax on the interest, then a 20% credit back, nets to zero. Higher-rate landlords pay 40% on profit that now includes the interest, but only get 20% back, so they lose 20% of their interest bill. Additional-rate landlords lose 25 percentage points. The rules are the same across England, Wales and Northern Ireland. In Scotland the higher Scottish income-tax rates make the sting worse, because the tax reducer is still only 20% even though Scottish higher and advanced rates run above 40%.

Worked example: a higher-rate landlord

Priya owns one buy-to-let. For 2026/27 she expects:

• Rental income: £20,000
• Mortgage interest: £9,000
• Other allowable expenses (letting agent, repairs, insurance): £2,000

She already earns enough from her job to be a higher-rate (40%) taxpayer, so every pound of rental profit is taxed at 40%.

The old way (pre-Section 24): profit = £20,000 − £9,000 − £2,000 = £9,000. Tax at 40% = £3,600.

Under Section 24: taxable profit = £20,000 − £2,000 = £18,000 (interest is no longer deducted). Tax at 40% = £7,200. Finance-cost reducer = 20% × £9,000 = £1,800. Net tax = £7,200 − £1,800 = £5,400.

Priya pays £1,800 more than under the old rules — exactly 20% of her £9,000 interest. That extra cost comes straight off her real return, even though her actual cash profit hasn't changed.

Worked example: a basic-rate landlord (broadly neutral)

Tom has a salary of £30,000 and one rental flat. Rental income £12,000, mortgage interest £4,000, other expenses £1,000. His total income stays inside the basic-rate band (the higher-rate threshold is £50,270).

Section 24 method: taxable rental profit = £12,000 − £1,000 = £11,000. Tax at 20% = £2,200. Reducer = 20% × £4,000 = £800. Net rental tax = £1,400.

Old method: profit = £12,000 − £4,000 − £1,000 = £7,000. Tax at 20% = £1,400. Identical. Basic-rate landlords pay the same either way — but read the next section, because Section 24 can quietly push you out of the basic-rate band.

The hidden trap: inflated total income

The cruellest part of Section 24 is that it inflates the income figure HMRC uses to set your tax band. Because the mortgage interest is added back before the band check, your "income" on paper can be far higher than the cash you actually keep. That can tip you into traps that have nothing to do with the headline rental tax:

• Higher-rate threshold (£50,270): rental profit stated gross of interest can push part of your income into the 40% band.
• Personal Allowance taper: once adjusted net income passes £100,000, your £12,570 allowance shrinks by £1 for every £2, creating an effective 60% rate. Our 60% tax trap calculator shows how that band works.
• High Income Child Benefit Charge: a higher income figure can trigger or increase the charge — check it with the child benefit tax calculator.

A landlord who was "basic rate" on cash terms can find themselves dragged into the higher-rate band purely because the interest is no longer deducted. The headline rental tax might look neutral, yet the knock-on effects cost real money.

How landlords reduce the Section 24 hit

There is no way to claim back more than the 20% reducer, but you can change the structure your property sits in. None of these suits everyone, and most have their own tax cost, so take advice before acting.

• Hold property in a limited company. Companies still deduct mortgage interest in full against rental profit and pay Corporation Tax, not income tax. But incorporating an existing portfolio can trigger Capital Gains Tax and Stamp Duty Land Tax, and extracting profit means dividend tax on top. Model it with a limited company tax calculator before moving anything.
• Shift ownership to a lower-earning spouse. If your partner is a basic-rate or non-taxpayer, transferring a share of the property (or all of it) can mean the rental profit is taxed at 20% or less, where Section 24 is neutral.
• Reduce gearing. Overpaying or clearing the mortgage cuts the interest that Section 24 penalises — though tying up cash in property has its own trade-offs.
• Claim every legitimate expense. Repairs, letting fees, insurance, ground rent and the replacement of domestic items relief are all still fully deductible. Keep clean records; our landlord rental income organiser helps you track them for the tax return.

Common mistakes landlords make with Section 24

• Still deducting the interest. The single biggest error: putting mortgage interest in the expenses box on the SA105 property pages. It belongs in the separate "residential finance costs" box that feeds the 20% reducer.
• Forgetting it covers more than the mortgage. "Finance costs" also include interest on loans to buy furnishings, and the costs of getting a loan, not just the main buy-to-let mortgage.
• Assuming it never affects basic-rate landlords. As shown above, the inflated income figure can push you over £50,270, £60,000 or £100,000.
• Ignoring the carry-forward. If your profit or income is too low to use the full 20% reducer this year, the unused part carries forward — don't lose track of it.
• Overlooking the payments on account. A bigger Self Assessment bill can trigger or raise payments on account, so your January and July payments climb too.

To sanity-check the wider picture, compare your figures against the rental income tax calculator and a standard income tax calculator so you can see how the rental profit stacks on top of your other income.

2026/27 rates that drive the result

The Section 24 reducer is always 20%, but the rate you pay on the rental profit depends on your income band. For England, Wales and Northern Ireland in 2026/27, the Personal Allowance is £12,570, the basic rate is 20% up to £37,700 of taxable income, the higher rate is 40% and the additional rate is 45% above £125,140. Scotland sets its own bands and higher rates, which makes the restriction more painful there. You can confirm the current figures on gov.uk income tax rates, and read HMRC's full guidance on the restriction at gov.uk's tax relief for residential landlords page.

These results are estimates for guidance only and not personal tax or financial advice. Your own position depends on your full income, ownership structure and circumstances, so check with HMRC or a qualified adviser before acting.

Related calculators

Once you've estimated your Section 24 position, plan the rest of your buy-to-let with the buy-to-let profit calculator and the buy-to-let mortgage calculator to see how rent, costs and borrowing fit together.