Section 24 Tax Changes: A Complete Guide for UK Landlords

Section 24 of the Finance (No.2) Act 2015 introduced one of the most significant changes to residential landlord taxation in a generation. Phased in between April 2017 and April 2020, it fundamentally changed how mortgage interest relief is calculated for landlords who own buy-to-let properties in their personal name — and the full effect continues to reshape who finds property investment worthwhile.

What changed — and why it matters

Before Section 24, landlords could deduct their full mortgage interest costs from their rental income before calculating their tax bill. A landlord earning £18,000 in rent and paying £12,000 in mortgage interest would only be taxed on £6,000 of profit. Simple, and broadly fair.

From April 2020 onwards, that deduction disappeared entirely. Landlords now receive a flat 20% tax credit on mortgage interest payments — calculated after the full rental income has already been assessed for tax. The result is that many landlords are paying tax on income they never actually receive.

A worked example

In this example the tax bill doubles. In cases where mortgage interest is high relative to rental income — common among landlords who bought at peak prices or who have not remortgaged for several years — landlords can find themselves paying tax on a loss.

Who is most affected?

Basic-rate taxpayers (those whose total income, including rent, falls below £50,270) are not materially worse off, since the 20% credit matches the relief they previously received. The change hits hardest at:

• Higher-rate and additional-rate taxpayers — where the removal of 40% or 45% relief is most visible.
• Landlords with high loan-to-value mortgages — larger loans mean larger interest bills and a larger Section 24 impact.
• Those whose rental income pushes them into a higher band — rental income is added on top of employment income, often dragging landlords into the 40% bracket unexpectedly.
• Landlords with multiple properties — the impact compounds across each property in the portfolio.

What are your options?

Incorporate into a limited company. Mortgage interest remains fully deductible against corporation tax within a limited company. However, transferring existing properties into a company typically triggers stamp duty land tax and capital gains tax on the transfer itself — making it expensive in most cases. Incorporation is most practical for landlords building a new portfolio from scratch.

Remortgage to reduce interest costs. Switching to a lower-rate product shrinks the mortgage interest bill and therefore the Section 24 hit. This helps but does not eliminate the problem — it reduces it in proportion to how much the rate improves.

Accept the reduced return. Landlords with low loan-to-value ratios or strong yields may find the post-Section 24 position still acceptable, especially after weighing the costs and tax implications of alternatives.

Sell. For landlords who are no longer profitable, or who find the administrative and tax burden outweighs the return, selling is often the clearest resolution. Many choose to exit before rising mortgage rates push the numbers further into the red.

Selling as a Section 24 exit strategy

Landlords who decide to sell typically want to do so quickly — particularly those already paying tax on losses, or managing tenant relationships on top of a deteriorating investment position. A standard estate agent route takes four to six months on average, during which Section 24 costs continue to accrue.

Firedstone purchases residential properties directly from landlords across England and Wales, with no chain, no estate agent fees, and a completion timeline you control. If your property is tenanted, we work with the existing tenancy rather than requiring vacant possession — making the process significantly simpler for landlords managing occupied portfolios.

This article contains general information only and does not constitute tax or financial advice. Please consult a qualified accountant or tax adviser regarding your individual circumstances.

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