Section 24 and the mortgage interest restriction
Individual landlords cannot deduct finance costs from rental profit. Instead they receive a basic rate tax reducer, which pushes taxable profit up and can move landlords into a higher tax band.
4 min read · Updated 2 August 2026
Overview
Individual landlords cannot deduct finance costs from rental profit. Instead they receive a basic rate tax reducer, which pushes taxable profit up and can move landlords into a higher tax band.
How it works
Rental profit is calculated before finance costs, then a credit worth 20% of the interest is applied against the tax bill. Higher and additional rate taxpayers lose relief on the difference.
The knock-on effects
Higher stated income can affect child benefit, personal allowance tapering and student loan repayments, even where cash profit is unchanged.
Company ownership
Companies still deduct interest as a business expense, which is why incorporation is discussed so often — but stamp duty, capital gains on transfer and higher mortgage rates all count against it.
Get advice on the numbers
The answer depends on your income, portfolio size and time horizon. Model both structures with an accountant rather than following general advice.
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This guide is general information for UK landlords and letting agents, not legal advice. Rules differ across England, Wales, Scotland and Northern Ireland — check your local requirements or take advice before acting.