Section 24 fundamentally changed how individual landlords can claim mortgage interest relief. Since April 2020, you can only claim relief at the basic rate of 20%, regardless of your actual tax rate. This creates a significant tax burden for higher-rate taxpayers that many landlords are still grappling with in 2026.

The key question isn't just "how much can I claim?" but "what's my actual tax relief worth?" The answer depends on your total income, mortgage costs, and tax planning strategy.

Section 24 Relief Limits in 2026/27

Under Section 24, mortgage interest relief is capped at 20% of your allowable finance costs. This applies to individual landlords only — limited companies can still deduct mortgage interest as a business expense before calculating corporation tax.

For the 2026/27 tax year, here's what you can claim:

  • Mortgage interest: 20% tax credit only
  • Other finance costs: 20% tax credit (arrangement fees, loan interest)
  • Maximum relief: Limited to your total finance costs multiplied by 20%

The relief works as a tax credit, not a deduction from rental income. This means it reduces your tax bill pound-for-pound, but only at the basic rate.

Calculating Your 2026 Section 24 Relief

Let's work through a practical example. A landlord with three BTL properties has:

  • Annual rental income: £48,000
  • Mortgage interest: £18,000
  • Other expenses: £8,000
  • Employment income: £45,000

Under Section 24, the calculation works like this:

Step 1: Calculate taxable rental profit
Rental income (£48,000) minus non-finance expenses (£8,000) = £40,000

Step 2: Add to total income
Employment income (£45,000) + rental profit (£40,000) = £85,000 total income

Step 3: Calculate tax relief
Mortgage interest (£18,000) × 20% = £3,600 tax credit

Without Section 24, this landlord would have deducted the full £18,000 mortgage interest, paying higher-rate tax on £67,000 instead of £85,000. The difference creates an additional tax burden of approximately £3,600 annually.

Impact on Different Tax Bands

Section 24 relief affects landlords differently depending on their tax position:

Basic Rate Taxpayers

If your total income (including rental profits) stays within the basic rate band, Section 24 has minimal impact. You effectively get the same relief as before — 20% of your mortgage interest.

Higher Rate Taxpayers

This is where Section 24 bites hardest. Higher-rate taxpayers lose the benefit of 40% relief on mortgage interest, receiving only 20% instead. For a landlord with £20,000 annual mortgage interest, this represents a £4,000 annual tax increase.

Additional Rate Taxpayers

The impact is even more severe for additional rate taxpayers (45% band). The same £20,000 mortgage interest now provides £4,000 relief instead of £9,000 — a £5,000 annual increase in tax liability.

Strategies to Maximise Your Relief

While you can't escape Section 24 as an individual landlord, you can optimise your position:

Spousal Income Splitting

Transfer properties to a spouse in a lower tax band to reduce the overall Section 24 impact. This works best when one spouse has significantly lower income than the other.

Company Incorporation

Moving your property portfolio into a limited company eliminates Section 24 restrictions entirely. Company incorporation allows full mortgage interest deduction, though it introduces corporation tax and other considerations.

Timing Capital Expenditure

Large capital expenses can be timed to reduce rental profits in high-income years, minimising the Section 24 impact when combined with other income sources.

Planning for 2026/27 and Beyond

Section 24 isn't changing for 2026/27, but other factors will affect your tax position:

Making Tax Digital: From April 2026, landlords with property income over £10,000 must use MTD-compliant software and file quarterly updates. This won't change Section 24 relief calculations but requires more detailed record-keeping.

Tax Band Changes: Keep track of personal allowance and tax band thresholds, as these affect whether Section 24 pushes you into higher tax brackets.

Interest Rate Environment: Rising mortgage rates increase your finance costs but remember — you only get 20% relief on the additional interest under Section 24.

When to Consider Professional Advice

Section 24 calculations can become complex when combined with multiple income sources, capital gains, and family tax planning. Consider specialist advice if:

  • Your total income fluctuates around tax band thresholds
  • You're considering incorporation or property transfers
  • You have significant capital gains alongside rental income
  • You're planning major property portfolio changes

A property tax specialist can model different scenarios using professional calculation tools to show the long-term impact of various strategies.

The Bottom Line

Section 24 relief in 2026 remains limited to 20% of your mortgage interest and finance costs. For many landlords, particularly higher-rate taxpayers, this represents a significant ongoing tax cost compared to the pre-2017 position.

The key is understanding exactly how Section 24 affects your specific situation and exploring legitimate strategies to minimise its impact. Whether that's through spousal transfers, incorporation, or careful timing of income and expenses, proper planning can significantly reduce the Section 24 tax burden.

Remember that tax legislation can change, and individual circumstances vary considerably. What works for one landlord may not suit another, making professional advice valuable for anyone with a substantial property portfolio affected by these restrictions.