How to Claim Mortgage Interest Relief After Section 24

The Accounted Tax Team·2 March 2026·9 min read

Section 24 fundamentally changed the way landlords get tax relief on their mortgage interest. If you own a buy-to-let property in your personal name, you can no longer deduct mortgage interest as an expense from your rental income. Instead, you receive a basic rate tax credit — and for many landlords, this shift has had a real impact on their tax bills.

Understanding how the new system works, how to calculate the credit, and how to claim it on your Self Assessment return is essential for every landlord with a mortgage. In this guide, we'll walk through everything you need to know about claiming mortgage interest relief after Section 24.

A Quick Recap: What Section 24 Changed

Before Section 24 (formally known as the Finance Act 2015 restriction on finance costs), landlords could deduct their mortgage interest from their rental income, just like any other allowable expense. This reduced the taxable profit, and for higher rate taxpayers, the relief was worth 40p for every £1 of interest paid.

Penny scans and categorises your receipts automatically via WhatsApp

Section 24 was phased in gradually from April 2017 and reached full effect from April 2020. Under the new rules:

Mortgage interest is no longer deductible from rental income
Instead, landlords receive a tax credit equal to 20% of their finance costs
The credit is applied against your overall tax liability, not against your rental profit

This means your rental profit will appear higher on paper (because you're no longer subtracting mortgage interest), but the tax credit reduces the amount of tax you actually pay.

For basic rate taxpayers, the end result is broadly the same — you were getting 20% relief before, and you still get 20% relief now. But for higher rate (40%) and additional rate (45%) taxpayers, the impact is significant, because the relief has effectively been capped at 20% regardless of your marginal rate.

We've covered the history and rationale behind Section 24 in detail in our guide to Section 24 explained for landlords.

What Counts as Finance Costs?

The Section 24 restriction applies to all finance costs connected to your rental property, not just mortgage interest. This includes:

Mortgage interest on buy-to-let mortgages
Interest on loans used to buy or improve the rental property
Interest on credit cards used for property expenses (though this is rarely practical)
Interest on overdrafts used for the property rental business
Arrangement fees and other incidental costs of obtaining finance for the property

It does not include the capital repayment element of your mortgage — that's never been deductible, as it's repaying the loan rather than paying for the use of the money.

Refinancing and Additional Borrowing

If you've remortgaged your property, the interest on the new mortgage qualifies for the Section 24 credit — provided the new borrowing doesn't exceed the original amount borrowed to purchase or improve the property. If you've remortgaged to release equity for personal use, the interest on the additional borrowing above the original purchase/improvement cost does not qualify.

For example, if you bought a property for £200,000 with a £150,000 mortgage, spent £30,000 on improvements, and then remortgaged to £250,000, only the interest on £180,000 (the original purchase plus improvements) qualifies. The interest on the extra £70,000 of borrowing does not.

How to Calculate the Tax Credit

The calculation itself is relatively straightforward, but it's important to understand the steps involved.

Step 1: Calculate Your Rental Profit (Ignoring Finance Costs)

Add up your total rental income and deduct all your allowable expenses except finance costs. This gives you your rental profit before the Section 24 adjustment.

Example:

| | Amount | |---|---| | Total rental income | £18,000 | | Less: Letting agent fees | (£2,160) | | Less: Insurance | (£380) | | Less: Repairs and maintenance | (£1,200) | | Less: Other allowable expenses | (£460) | | Rental profit (before Section 24) | £13,800 |

Step 2: Add the Rental Profit to Your Other Income

Your rental profit of £13,800 is added to your other income (employment, pension, etc.) to determine your total income and which tax bands it falls into.

Let's say you earn £42,000 from employment. Your total income is:

£42,000 + £13,800 = £55,800

After the personal allowance of £12,570, your taxable income is £43,230.

This means:

£37,700 is taxed at the basic rate (20%) — that's the band from £12,571 to £50,270
£5,530 is taxed at the higher rate (40%) — that's the portion above £50,270

Step 3: Calculate the Tax Credit

Your total mortgage interest for the year is £6,000. The Section 24 tax credit is 20% of your finance costs:

£6,000 × 20% = £1,200

This £1,200 is subtracted from your overall tax bill as a credit.

Step 4: Understand the Impact

Without Section 24 (under the old rules), you would have deducted the £6,000 from your rental income, reducing your rental profit to £7,800. This would have kept more of your income in the basic rate band, saving you tax at 40% on the portion that would otherwise have been pushed into the higher rate.

Under Section 24, your rental profit stays at £13,800, pushing you further into the higher rate band. You pay 40% tax on £5,530, but you only get a 20% credit on your mortgage interest. The difference is the additional tax cost of Section 24.

In real terms, the additional tax burden in this example is:

Old rules: £6,000 relief at 40% = £2,400 saved
New rules: £6,000 relief at 20% = £1,200 saved
Additional tax cost: £1,200 per year

Claiming the Credit on Your Self Assessment Return

On the Self Assessment tax return, mortgage interest relief is claimed through the UK property pages (SA105). Here's where the numbers go:

Box 44 — Residential Finance Costs

Enter the total finance costs (mortgage interest, loan interest, and incidental costs of finance) for the year. This is the amount on which the 20% credit will be calculated.

Box 45 — Unused Residential Finance Costs Brought Forward

If you had finance costs that couldn't be fully relieved in a previous year (because the credit exceeded your tax liability), you can carry them forward and enter the brought-forward amount here.

How HMRC Calculates the Credit

HMRC's system will automatically calculate the 20% credit based on the figures you enter and apply it to reduce your tax bill. You don't need to do the calculation yourself — you just need to make sure the figures in boxes 44 and 45 are correct.

However, it's useful to understand the calculation so you can check that the tax computation HMRC produces looks right. If you use software like Accounted to prepare your figures, the categorisation of mortgage interest payments throughout the year means you'll have an accurate total ready to enter when it's time to file.

The Restriction on the Tax Credit

There's an important nuance to the Section 24 credit that catches some landlords out: the credit is restricted to the lowest of three amounts:

Finance costs for the year (plus any brought forward from earlier years)
Profits of the property business for the year (the rental profit you've calculated)
Adjusted total income exceeding the personal allowance

In most cases, the full credit is available because the landlord's income exceeds their finance costs. But if you have a low-income year — perhaps due to void periods or high repair costs — the credit could be restricted, and any unused portion is carried forward to future years.

Carried-Forward Finance Costs

If the Section 24 credit can't be used in full because of the restriction above, the unused amount isn't lost. It's carried forward to the next tax year and added to that year's finance costs. You claim it through box 45 of the SA105.

There's no time limit on carrying forward unused finance costs, so they'll eventually be used once your income recovers.

Impact on Different Taxpayers

The effect of Section 24 varies dramatically depending on your marginal tax rate:

Basic Rate Taxpayers (20%)

If all your income (including rental profit) falls within the basic rate band (up to £50,270), Section 24 makes very little practical difference. You were getting 20% relief before, and you're getting 20% relief now.

However, there's a subtle trap: because your rental profit is now higher (you haven't deducted finance costs), it could push your total income into the higher rate band, even though the actual cash position hasn't changed.

Higher Rate Taxpayers (40%)

This is where the impact is most keenly felt. The effective rate of relief has dropped from 40% to 20%, meaning you're paying twice as much tax on your mortgage interest as you were under the old rules.

Additional Rate Taxpayers (45%)

The impact is even greater, with the effective relief dropping from 45% to 20%.

Interaction with Other Thresholds

The inflated rental profit figure can also affect other areas of your tax position:

Personal allowance taper — if your adjusted net income exceeds £100,000, you start losing your personal allowance. The higher rental profit figure could trigger this
Child benefit charge — the High Income Child Benefit Charge kicks in at £60,000. Higher rental profits could push you over this threshold
Student loan repayments — these are calculated on total income, which is now higher

Strategies for Managing the Section 24 Impact

While you can't avoid Section 24, there are legitimate strategies that some landlords use to manage its impact:

Transferring Properties to a Spouse

If one partner is a basic rate taxpayer and the other is a higher rate taxpayer, transferring a share of the property (or adjusting the beneficial ownership split) can reduce the overall tax burden. This involves using Form 17 to split rental income in a tax-efficient way.

Incorporating — Transferring to a Limited Company

Companies are not affected by Section 24 — they can still deduct mortgage interest as an expense. Some landlords have transferred their properties to a limited company for this reason. However, the transfer triggers Stamp Duty Land Tax and potentially Capital Gains Tax, so the sums need to be done very carefully.

Reducing Borrowing

The simplest way to reduce the Section 24 impact is to reduce your mortgage — less interest means less of a gap between the relief you're getting and the relief you'd have got under the old rules.

Reviewing Your Portfolio

Some landlords have found that certain properties are no longer financially viable after Section 24, particularly those with high loan-to-value ratios. Reviewing your portfolio and disposing of underperforming properties may be worth considering.

For more on the broader picture, our guide to what expenses landlords can claim is a useful companion read.

Keeping Accurate Records

Whatever your approach, keeping accurate records of your finance costs is essential. You'll need:

Annual mortgage statements showing the interest paid (not the total payment, which includes capital)
Loan statements for any other borrowing used for property purposes
Records of arrangement fees and other incidental finance costs
A clear trail showing the purpose of any borrowing, especially if you've remortgaged

These records should be kept for at least five years after the Self Assessment filing deadline for the relevant tax year.

Accounted helps UK sole traders stay on top of their bookkeeping and tax. Start your free 30-day trial at getaccounted.co.uk

Related reading:

More on Property

Property