Since April 2020, landlords with residential rental properties have not been able to deduct mortgage interest from their rental income before working out their tax bill. Instead, they receive a flat-rate tax credit - currently worth 20% of the interest paid, rising to 22% from April 2027.
For basic-rate taxpayers this often makes little difference. But for higher and additional-rate taxpayers - and for landlords whose rental profit, once mortgage interest is added back in for tax purposes, pushes them into a higher band - Section 24 can mean paying tax on income that, in cash terms, never reached their pocket. In some cases, landlords end up with a tax bill larger than their actual rental profit.
This guide will walk through exactly how the restriction works, with worked examples at each tax band, who is affected most, and the legitimate ways landlords structure their finances - from incorporation to pension contributions - to reduce its impact.
The full guide will cover: