Section 24 impact calculator

How to read your result

The headline is the difference between two calculations of the same year. The first is the tax you actually pay: rental profit worked out with no deduction at all for mortgage interest, added to your other income, taxed at 20%, 40% or 45%, then reduced by a basic rate tax reducer. The second is the tax you would have paid if finance costs were still an ordinary expense, as they were before the restriction was phased in from 6 April 2017 and fully in force from 6 April 2020. The gap between them is what Section 24 costs you, in cash, this year.

The reducer is not a deduction and it does not behave like one. It is given at Step 6 of the income tax calculation, as 20% of the lowest of three figures: your finance costs, your property business profits, and your adjusted total income above the personal allowance. Because it is the lowest of the three, a landlord with a large mortgage and a small profit gets relief measured on the profit rather than on the interest — and the balance is carried forward to a later year rather than lost. The reduction also cannot create a tax refund.

How the restriction works

Rent is taxed at your marginal rate and interest is relieved at 20%. For a basic rate taxpayer those are the same number and the restriction changes nothing. For a higher rate taxpayer the rent is taxed at 40% and the interest comes back at 20%, so every £1,000 of mortgage interest leaves £200 of extra tax behind. At the additional rate the gap is 25 points. That is the whole of Section 24, and it is why the restriction is invisible to some landlords and brutal to others.

The statutory basis is ss.272A and 272B ITTOIA 2005, with ss.399A and 399B ITA 2007 for partnerships. It applies to individuals, trustees of accumulating or discretionary trusts, and personal representatives. It does not apply to companies, and it does not apply to loans wholly for commercial property — those two exclusions are the reason the rest of this site talks about structure at all.

The threshold effects are usually the bigger number

The direct cost is the part everyone talks about. The threshold effects do the real damage, because gross rent inflates your total income even where the cash profit is small or nil.

The first line is £50,270 — the £12,570 personal allowance plus the £37,700 basic rate band. Cross it and the next pound of income is taxed at 40% while the reducer stays at 20%. The second is £100,000, where the personal allowance tapers away by £1 for every £2 of income, producing an effective rate of 60% through that band and no allowance at all by £125,140. The third is child benefit: the High Income Child Benefit Charge is assessed on income for the year, and the restriction raises that figure without putting a penny more in your pocket. If you or your partner claim child benefit, that is a calculation to have run properly against the threshold for your year rather than estimated.

What changes on 6 April 2027

Property income gets its own income tax rates: 22%, 42% and 47%, two points above the general rates. It was announced at Budget 2025 and legislated in the Finance Act 2026, and the stated rationale is that property, savings and dividend income bear no National Insurance, so the rates are raised to narrow the gap with earned income. The Section 24 reducer moves with them, to 22% — a small offset against a materially larger rate rise. The mechanism itself does not change.

Two things to hold on to. The measure covers England, Wales and Northern Ireland, applying in Wales through the Welsh rates of income tax, while a Scottish taxpayer's property income stays on the Scottish rates. And companies are not mentioned — the measure addresses individuals, partnerships, trusts and estates, which is exactly why it strengthens the case for a company that retains profit. The figures in the calculator above are 2026/27.

What you can do about it

Start with the things that are not structural. Every allowable expense you are not claiming costs you at your marginal rate: replacement of domestic items relief on furniture, furnishings, appliances and kitchenware (a replacement, not the initial purchase, and not fixtures such as baths, toilets or boilers), the correct treatment of repairs against improvements, and the professional and travel costs landlords routinely leave out. Where a property is held jointly with a spouse or civil partner, the income is split 50:50 by default under s.836 ITA 2007, and a Form 17 declaration under s.837 can change that — but only where the beneficial interests genuinely are unequal, it must be made jointly, and there is a strict 60-day time limit with no power to extend it.

Then look at structure, carefully and without the internet's enthusiasm. Incorporating removes the restriction, because companies are not affected and interest is fully deductible — and it introduces capital gains tax on transfer at market value, stamp duty on market value, and a second layer of tax on getting the money out. The incorporation calculator does that arithmetic on your numbers and shows the cost of getting there, and our incorporation page sets out when it helps and when it does not.

None of this is advice, and none of it is a recommendation about whether to keep, sell, refinance or incorporate anything — we explain how the rule works and the decision stays yours. If you have not yet checked whether quarterly reporting applies to you, the MTD checker takes a minute and turns on the same gross rent figure you have just typed in here. For this calculation built on your actual return rather than four boxes, ask us. It is free, and it usually turns up two or three things worth fixing before the year end.