Section 24 of the Finance Act 2015 is the single most impactful landlord tax change in a generation — restricting mortgage interest relief for individual landlords to a 20% basic-rate credit. For higher-rate taxpayers, the consequences are severe. This guide explains how Section 24 works, who it hurts most, and what moving properties into a limited company really means in 2026. Part of our property and land tax hub.
All figures sourced from HMRC's published guidance for the current tax year. Section 24 has been fully in force since 6 April 2020 with no changes announced for 2026/27.
Per HMRC's published guidance on Section 24, the restriction works in two steps:
HMRC publishes worked examples of how Section 24 applies to landlords at different income levels at GOV.UK: Changes to tax relief for residential landlords.
The impact of Section 24 depends almost entirely on your marginal income tax rate — and specifically on whether the rental income (calculated without the mortgage interest deduction) pushes you into a higher band.
| Tax situation | Section 24 impact |
|---|---|
| Basic-rate taxpayer (20%) — stays in basic rate including rental profit | Minimal. 20% tax on rental profit, 20% credit on interest = roughly neutral |
| Basic-rate taxpayer whose rental income pushes them into 40% band | Significant — the portion in 40% band is affected even though only 20% credit available |
| Higher-rate taxpayer (40%) — all rental income taxed at 40% | Severe. Pays 40% on income used for mortgage; gets only 20% back |
| Additional-rate taxpayer (45%) | Most severe. Pays 45% on mortgage-funded income; gets only 20% back |
| Limited company | Not affected — companies still deduct mortgage interest in full |
Section 24 increases this landlord's tax from £2,000 to £4,400 — a 120% increase — despite identical rental income, expenses and mortgage interest. Their actual net cash is unchanged; only the tax bill has risen.
Use our property tax calculator to model the Section 24 impact on your specific rental income and mortgage interest figures.
Per HMRC's published guidance, Section 24 applies to individuals holding residential property — not to limited companies. A company that holds buy-to-let properties can still deduct mortgage interest in full as a business expense against rental income before calculating its taxable profit. The company then pays Corporation Tax on the remaining profit (currently 25% for profits above £250,000; 19% for profits below £50,000; marginal relief between).
This makes limited company ownership significantly more tax-efficient for higher-rate taxpayer landlords — but the advantages must be weighed carefully against substantial one-time transfer costs.
Transferring properties from personal ownership into a limited company is a disposal for tax purposes. Per HMRC's published guidance: (1) Capital Gains Tax may be payable on any gain between the original purchase price and the current market value; (2) Stamp Duty Land Tax (or LBTT/LTT) is charged on the transfer at full market value — including the additional dwelling surcharge. These costs can be substantial for a large portfolio and may take many years of Section 24 savings to recover. Professional advice is essential before proceeding.
This example is illustrative only — actual figures depend on the gain, mortgage situation, and specific reliefs available. These are the types of costs that must be modelled against projected Section 24 tax savings before any decision is made. Always obtain professional advice before incorporation.
Rather than incorporating the whole portfolio at significant upfront cost, some landlords consider:
Our expert matching service can connect you with a specialist who regularly models the Section 24 vs incorporation decision for portfolio landlords.
The decision to incorporate — or not — is one of the most significant financial choices a portfolio landlord can make. It requires modelling your specific portfolio, mortgage structure, tax position, and timeline. Our matching service connects you with specialists who do this every day.
Find a Section 24 specialist →The most frequently asked questions about Section 24 and property company structures in 2026/27.
Free HMRC-sourced guidance on the mortgage interest restriction. For modelling your specific portfolio impact and the true cost of incorporation, match with a specialist.
Guidance, not advice. Based on HMRC's published rules for 2026/27. The decision to incorporate a property portfolio involves complex tax and legal considerations — always obtain professional advice before making any structural changes. Verify at GOV.UK.
