How Section 24 Changed Mortgage Interest Relief on Rental Property
The Section 24 of the Finance (No. 2) Act 2015 introduced one of the most significant tax changes for buy-to-let landlords in recent years.
Rather than allowing finance costs to be deducted before calculating taxable rental profits, the legislation replaced higher-rate mortgage interest relief with a basic-rate tax reduction.
While the rules have now been fully implemented, they continue to affect many landlords and remain an important consideration when reviewing the profitability of a residential property portfolio.
Understanding the Changes to Mortgage Interest Relief
For many years, individual landlords could deduct the full cost of qualifying finance costs before calculating the tax due on their rental income. However, the Section 24 of the Finance (No. 2) Act 2015 fundamentally changed how mortgage interest is treated for tax purposes.
Although the legislation was introduced in stages between 2017 and 2020, its impact continues to be felt today, particularly as higher borrowing costs have increased the financial pressures on many landlords. Understanding how the rules work can help you make informed decisions about your property investments and avoid unexpected tax liabilities.
Before the introduction of Section 24, landlords could deduct qualifying finance costs, including mortgage interest relief on rental property, before calculating their taxable rental profits.
Today, this is no longer the case for most individual residential landlords.
Instead of deducting finance costs from rental income, landlords receive a basic-rate tax reduction on qualifying finance costs. While this may have little effect on some investors, those with larger mortgages or higher borrowing costs can find themselves paying tax on a larger taxable profit than they actually receive.
This does not necessarily mean landlords are making more money. In many cases, their real profits have reduced while their tax liability has increased.
As a result, the impact of Section 24 has become even more noticeable as interest rates and borrowing costs have risen.
While Section 24 has been fully implemented for several years, landlords continue to face rising costs. According to the Office for National Statistics, average UK private rents increased by 3.3% in the year to June 2026, reflecting the ongoing financial pressures affecting both landlords and tenants.
Who Is Affected?
The legislation primarily affects individual landlords who own residential buy-to-let property with outstanding borrowing.
Those most likely to notice the greatest financial impact include:
- Higher and additional rate taxpayers.
- Landlords with significant borrowing.
- Investors with multiple rental properties.
- Owners whose finance costs represent a large proportion of their rental income.
For basic rate taxpayers, the effect may be smaller, although some landlords may find the changes increase their taxable income sufficiently to move them into a higher tax band.
Landlords who own properties outright without finance costs are generally unaffected by the mortgage interest restriction.
Limited companies are subject to different tax rules, which is why professional tax advice is essential before making decisions about ownership structures.
Which Finance Costs Are Affected?
Section 24 applies to qualifying finance costs connected with residential rental property.
These may include:
- Mortgage interest.
- Interest on loans used to purchase or improve residential property.
- Certain finance charges, including some mortgage interest payments and borrowing costs.
It is important to remember that these rules relate specifically to finance costs. Many other allowable expenses, such as repairs, maintenance, insurance, letting agent fees and safety compliance costs, may still be deductible when calculating rental profits where permitted by HMRC rules.
The Wider Financial Impact
The Section 24 of the Finance (No. 2) Act 2015 has encouraged many landlords to review the financial performance of their investments.
For some, this has meant reassessing underperforming properties, while others have reviewed borrowing arrangements or future acquisition plans.
Some landlords have also explored transferring properties into limited companies. While company ownership may offer advantages in certain circumstances, it is not suitable for everyone.
Transferring property can trigger Capital Gains Tax, Stamp Duty Land Tax and additional administrative responsibilities, so independent professional advice should always be obtained before making structural changes.
Every property portfolio is different. While tax advice should always come from a qualified professional, effective property management can help improve rental performance and protect your investment. Contact to Blue Crystal Property Management to find out how we can help you get the most from your portfolio.
Reviewing Your Property Portfolio
Every landlord’s circumstances are different, and there is no single solution to reducing the impact of Section 24.
Depending on your objectives, you may wish to consider:
- Reviewing the profitability of each property.
- Reducing borrowing where possible.
- Improving rental yields.
- Planning future purchases carefully.
- Seeking advice from a qualified accountant before changing ownership arrangements.
Good property management also plays an important role. Minimising void periods, carrying out preventative maintenance and ensuring properties achieve an appropriate market rent can all help improve long-term investment performance.
At Blue Crystal Property Management, we work closely with landlords to help protect the value of their investments through proactive residential property management and expert industry knowledge.
If you’re reviewing your property portfolio, speak to our experienced team to find out how professional property management can help maximise your returns.
Common Misunderstandings About Section 24
One of the most common misconceptions is that Section 24 introduced a new tax on landlords.
In reality, the legislation changed how qualifying finance costs are treated for tax purposes rather than introducing a separate tax.
Another common misunderstanding is that every landlord is affected equally. The impact depends on individual circumstances, including borrowing levels, overall income and property ownership structure.
Understanding your own tax position is therefore essential before making decisions about selling property, restructuring ownership or increasing rents.
Frequently Asked Questions
Can I still claim other property expenses?
Yes. While finance costs are treated differently under Section 24, many other allowable property expenses may still be deductible, subject to current HMRC guidance.
Should I transfer my properties into a limited company?
There is no one-size-fits-all answer. Company ownership may be appropriate in some circumstances, but it can have significant tax and legal consequences. Professional advice should always be obtained before making any changes.
How Blue Crystal Property Management Can Help
The Section 24 of the Finance (No. 2) Act 2015 has changed the financial landscape for many residential landlords, making careful planning and efficient property management more important than ever.
Whether you own a single investment property or a growing portfolio, Blue Crystal Property Management provides professional support to help you maximise rental performance, reduce unnecessary costs and manage your property with confidence.
Book your 30-minute complimentary property consultation by phone: 020 8994 7327 or email: pm@bluecrystallondon.co.uk.
Reviewed by: Pelin Martin
Blue Crystal Residential Property Management was founded by Pelin Martin, a former estate agent with deep expertise in west and central London. Since starting her property career in 2006, she’s built a reputation for local knowledge, strong negotiation skills, and a warm, professional approach. Today, she leads Blue Crystal with a commitment to high standards, client care, and full compliance with all property management regulations.