Section 24 Calculator UK — How Much More Tax Do You Pay?

Section 24 of the Finance (No. 2) Act 2015 — often called the "landlord tax" or "mortgage interest relief restriction" — fundamentally changed how UK landlords calculate their income tax liability on rental income. Before 2017, individual landlords could deduct the full amount of mortgage interest paid from their rental income before calculating their taxable profit. A landlord paying £8,400 per year in mortgage interest could simply subtract that from their rent to arrive at a lower taxable figure.

From April 2017, the restriction was phased in over four years, becoming fully effective from April 2020. Since then, individual landlords cannot deduct any mortgage interest from their rental income. Instead, they receive a tax credit worth 20% of the finance costs paid — regardless of their personal tax rate.

The effect is that the taxable profit for a landlord is now calculated on gross rent minus other expenses (but not mortgage interest). A landlord in the higher rate (40%) or additional rate (45%) band now pays far more tax than they did under the old system. In some cases, landlords find themselves paying tax on profits that are lower than the tax bill itself — effectively losing money on a property that appears to be generating a positive cashflow.

Under the old rules, a higher-rate taxpayer paying £8,400 per year in mortgage interest on a property earning £18,000 rent could deduct the interest before tax, reducing their taxable profit. Under Section 24, they must pay 40% tax on the full profit (rent minus non-finance expenses), then claim back a 20% credit on the interest. The net effect is that they pay tax on £20 of interest for every £100 they pay to the bank — a real additional cost that reduces cashflow.

This has made highly leveraged properties — those with large mortgage balances relative to rent — particularly hard hit. A property with a loan at 75% LTV and a rate of 5.5% may generate very little net cashflow for a 40% taxpayer even before factoring in maintenance, voids, and management costs. Use the calculator above to see the specific impact for your tax band and interest level.

• Higher and additional rate taxpayers — the credit is worth 20% of interest paid regardless of your tax rate. If you are a 40% taxpayer, you lose 20p per £1 of interest compared to the old system. At 45%, you lose 25p per £1.
• Highly leveraged landlords — the higher the mortgage balance relative to rent, the greater the impact. A property with a 75%+ LTV will typically see a much more significant S24 effect than a property with a 40% LTV or no mortgage at all.
• Landlords whose rental income pushes them into a higher tax band — because S24 taxes you on a higher declared profit, it can push some basic rate taxpayers into the higher rate band, creating a double penalty.

Consider a landlord with annual rental income of £18,000, mortgage interest of £8,400, and other expenses of £2,400.

As this example shows, a basic rate taxpayer is broadly unaffected. A higher rate taxpayer pays an extra £1,680 per year on a single property. For a landlord with ten properties, that is £16,800 per year in additional tax — a significant erosion of returns.

This is one of the most common questions for higher-rate taxpayer landlords post-Section 24. A limited company is not subject to Section 24 — it pays corporation tax (currently 19% for profits up to £50,000; 25% for profits above £250,000) and can still deduct mortgage interest as a business expense before calculating its tax liability. For a heavily leveraged portfolio owned by a 40% taxpayer, this can represent a very significant tax saving.

However, the decision is not straightforward:

• SDLT on transfer — transferring personally-owned properties into a company triggers stamp duty land tax at the additional dwelling rates, even between spouses or into a company you own. On a £200,000 property, this is typically £6,000–£9,000 per property.
• Capital gains tax — the transfer also triggers a disposal for CGT purposes. Any gains accrued since acquisition will be taxable.
• Higher mortgage rates — limited company buy-to-let mortgages are typically 0.5–1% more expensive than personal mortgages, and there are fewer lenders to choose from.
• Ongoing costs — accountancy fees for a property investment company are typically £1,000–£2,500 per year depending on complexity.

For landlords purchasing new properties, doing so within a limited company from the outset avoids the transfer costs and is increasingly common. For existing portfolios, the analysis is highly individual and requires professional advice. Use the calculator above to quantify your personal Section 24 exposure, then discuss the limited company question with a specialist property accountant.

• Buy-to-Let Calculator — full BTL analysis including cashflow and Section 24 comparison tab
• Rental Yield Calculator — gross and net yield for any property
• Cashflow Calculator — detailed monthly cashflow including all costs