Section 24 Calculator
Calculate the impact of mortgage interest restrictions on your rental income
What is Section 24?
Section 24 of the Finance (No. 2) Act 2015 restricts mortgage interest relief for residential landlords. Instead of deducting mortgage interest from rental income, landlords now receive a basic rate (20%) tax credit. This particularly affects higher and additional rate taxpayers.
Who is affected by Section 24?
Individual landlords who own residential property personally are affected. Companies (limited companies) are NOT affected - they can still fully deduct mortgage interest. This is why many landlords have incorporated their property businesses.
How does the 20% tax credit work?
You calculate your rental profit without deducting mortgage interest, pay tax on that amount, then receive a 20% tax credit on the interest paid. For basic rate taxpayers, the effect is neutral. For 40% taxpayers, you effectively only get 20% relief instead of 40%.
Can I avoid Section 24?
Options include: transferring properties to a limited company (triggers CGT and SDLT), paying down mortgages, transferring to a lower-earning spouse, or increasing rent. Each has implications - consult a tax advisor for your specific situation.