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A UK landlord’s guide to Section 24

Section 24 of the Finance (No.2) Act 2015 changed the way landlords are taxed, increasing financial burdens and squeezing margins – leaving landlords more vulnerable to unexpected costs, such as dealing with a non-paying tenant.  

While we are not accountants, we summarise below how Section 24 works, how it affects landlord income, and how landlord insurance can help minimise costs and protect your asset should the unexpected happen.  

28.08.26

By Alice Longhurst

This content was factually correct when written but may not reflect current developments or information.

Section 24

What is Section 24? 

Section 24 is part of the Finance (No.2) Act 2015. It means that landlords pay tax on all rental income received; mortgage interest or other fees such as mortgage admin costs cannot be deducted. You can, however, claim back mortgage interest costs as a 20% tax credit (the basic rate of Income Tax).  

If you’re a landlord with other income, Section 24 increases the risk of being pushed into a higher tax bracket, increasing the amount of Income Tax paid overall. 

What happened before Section 24 was introduced? 

Section 24 was phased in gradually between April 2017 and April 2020. Before its introduction, landlords could deduct mortgage interest payments and other fees (such as mortgage administration costs and loans used to pay for furniture).  

Why was Section 24 introduced? 

Section 24 tax changes were introduced with several aims in mind: 

  • To curb the private rental market by making it less attractive to landlords. 

  • To stop higher earners from claiming back large amounts of tax relief. 

  • To make the system fairer between buy-to-let property owners and residential property owners. 

  • To increase the level of housing stock and give first-time buyers a greater opportunity to get a foothold on the property ladder. 

How does Section 24 affect landlord income? 

Under Section 24 rules, you’ll need to pay Income Tax on everything you earn from renting out property. You can then claim a 20% tax credit on mortgage interest costs only; for example: 

  • Your rental income is £15,000. 

  • Your mortgage interest is £5,000. 

  • Under Section 24, you’ll need to pay tax on the full rental income (£15,000). This is £3,000 for basic-rate taxpayers (20%) and £6,000 for higher-rate taxpayers (40%). 

  • You can then claim back 20% of your mortgage interest payments, which is £1,000 (20% of £5,000). 

  • Basic-rate taxpayers will pay £2,000 in tax on their rental income, and higher-rate taxpayers will pay £5,000. 

While this calculation is relatively simple, tax on rental income can be complex, as different reliefs are available depending on the type of property you rent and the allowable expenses.  

Remember that under Section 24, tax is calculated on gross income. If you’re a basic-rate taxpayer, this can push you into a higher-rate tax band, impacting your profits. 

How can landlords manage Section 24? 

There are no Section 24 ‘loopholes’, but there are legal business structures and property types that are exempt from the Section 24 rules. These structures aren’t necessarily right for all landlords, and there will be additional tax liabilities and considerations to take into account, so it is recommended to seek legal and tax advice before making a decision.  

Setting up a limited company 

Section 24 does not apply to limited companies, so incorporating your portfolio means you avoid its effects. However, bear in mind that limited companies are subject to Capital Gains Tax and Corporation Tax.  

You’ll also need to weigh up the sums involved, as there will be costs associated with transferring the property to a limited company structure. Typically, setting up a limited company works well for large portfolio holders or higher-rate taxpayers, but a specialist adviser will be able to help you understand your options.  

Investing in commercial property 

Commercial property is exempt from Section 24. Selling your residential properties and reinvesting in commercial spaces can help you avoid the cost. However, as with incorporation, you’ll face other taxes, including Capital Gains Tax and Corporation Tax.  

Are furnished holiday lets exempt from Section 24? 

Since April 2025, furnished holiday lets (FHLs) are no longer exempt from Section 24. FHLs are treated the same as standard residential lets for mortgage interest relief.  

What is a Section 24 notice in relation to a commercial lease? 

If you rent out commercial property, you may also come across Section 24 of the Landlord and Tenant Act 1954. This clause gives commercial tenants the automatic right to renew their lease, providing businesses with continuity and security.  

How to protect your rental yields 

Section 24 increases your tax liability, lowering profits and potentially impacting cash flow. With this in mind, controlling rental running costs and mitigating the financial burden of unexpected events is essential to maintaining long-term viability.  

For many, landlord insurance can help mitigate some of those burdens, covering costs that might otherwise fall to you as a private residential landlord. For example, legal & rent guarantee insurance covers rental income if a tenant stops paying rent, while landlord building insurance compensates you for damage to the building itself.  

FAQs 

Minimising financial burdens and protecting your assets

The private rental market has undergone significant change in just a few years, with the most significant legislative changes set out in the recent Renters’ Rights Act. This, coupled with increased landlord tax liabilities, makes it more important than ever to protect the assets you have.  

At Alan Boswell Group, we offer five-star-rated landlord insurance protection, with policies tailored to reflect your risks. Call or email us to find out more about how we can help you with landlord insurance

As a reminder, none of the above should be considered personal tax advice.  How you are taxed depends on your personal circumstances, and the tax rules change regularly. If you need tax advice, you should speak to a professional accountant. 

Speak to us:  01603216399

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