Section 24 Impact Calculator
Section 24 of the Finance Act 2015 removed the right for landlords to deduct mortgage interest as an expense. Instead, you now receive a 20% basic rate tax credit on your mortgage interest. For higher and additional rate taxpayers, this creates a significant extra tax bill — sometimes making a property appear profitable on paper while actually running at a loss after tax. This calculator shows you exactly how much extra tax Section 24 is costing you.
Why this matters
Many landlords underestimated the Section 24 impact when it was introduced. Some are now paying tax on phantom profits — understanding your true position is essential for deciding whether to sell, restructure, or incorporate.
Key points
- Section 24 was phased in between 2017 and 2020 — it is now fully in effect
- The 20% tax credit only benefits basic rate taxpayers — higher rate payers effectively lose 20p in every pound of interest
- For a 40% taxpayer, Section 24 can add thousands of pounds to annual tax bills
- Moving to a limited company structure avoids Section 24 but has its own costs and SDLT implications
- Increasing rent does not fully offset Section 24 — it increases your taxable income further
- Selling a property also triggers potential Capital Gains Tax — weigh all options before deciding
Frequently asked questions
Does Section 24 apply to all landlords?
Section 24 applies to individual landlords and partnerships who own residential buy-to-let property. It does not apply to limited companies, furnished holiday lets, or commercial property.
Does Section 24 affect my personal allowance?
Yes — because mortgage interest is added back to your income before calculating tax, it can push you above the £100,000 threshold where your personal allowance tapers away, creating a 60% effective marginal rate.
Can I still deduct other mortgage-related costs?
Only mortgage interest is restricted. Arrangement fees are treated differently — they may be deductible or need to be capitalised depending on circumstances. Consult a tax adviser.
How does switching to a limited company help?
Limited companies are not subject to Section 24, so they can still deduct mortgage interest as a business expense. However, incorporation involves SDLT, CGT, and ongoing administrative costs.