Section 24 Tax: How It Affects Buy-to-Let Investors in 2026
Section 24 of the Finance Act 2015 fundamentally changed the way mortgage interest is taxed for buy-to-let investors. Since 2017, the relief available on mortgage interest has been progressively restricted, and by 2026, the landscape looks very different from what many older investors remember. Whether you're a seasoned portfolio holder or considering your first rental property, understanding Section 24 in 2026 is essential for calculating real returns and structuring your investments correctly.
The impact is significant: a typical buy-to-let investor with £300,000 in mortgages could see their tax bill increase by £3,000–£5,000 annually compared to pre-2017 rules. This post explains what Section 24 means, how it's being phased in, the current position for 2026, and practical strategies to manage the impact on your portfolio.
What Is Section 24 and Why Does It Matter?
Section 24 restricts mortgage interest relief for individual landlords. Before April 2017, buy-to-let investors could deduct 100% of their mortgage interest against rental income as a business expense, reducing taxable profits directly at their marginal tax rate (20%, 40%, or 45%, depending on income).
Under Section 24, mortgage interest is no longer treated as a straightforward deduction. Instead, individual landlords receive basic-rate tax relief (20%) only, regardless of their actual tax bracket. For higher-rate and additional-rate taxpayers, this creates a significant shortfall.
The restriction applies to:
- Buy-to-let mortgages (the primary target)
- Loans taken out to fund rental property purchases
- Interest on re-mortgages for the same purpose
- Bridging loans used for rental property acquisition
The relief does not apply to:
- Property businesses run through limited companies (though other considerations apply)
- Holiday lets (which may qualify differently)
- Furnished holiday lets (with specific conditions)
The Phase-In Timeline: Where We Are in 2026
Section 24 was introduced gradually rather than all at once. This phase-in period is now largely complete, but understanding the timeline explains why some older portfolios see different tax positions than new ones.
2017–2018: 75% of mortgage interest deductible at marginal rate; 25% restricted to basic rate
2018–2019: 50% deductible at marginal rate; 50% restricted to basic rate
2019–2020: 25% deductible at marginal rate; 75% restricted to basic rate
2020–2021 onwards: 0% deductible at marginal rate; 100% restricted to basic rate
By the 2020–2021 tax year, Section 24 restrictions were fully in place, and they remain so in 2026. No further changes to the restriction mechanism are planned, though there's ongoing pressure from landlord organisations for reform or abolition.
Calculating the Impact on Your Tax Bill
The practical effect of Section 24 depends on your personal tax bracket and your mortgage size.
Example: A 40% taxpayer with a £200,000 mortgage at 4.5% interest
- Annual mortgage interest: £9,000
- Pre-Section 24 tax relief at 40%: £3,600
- Current relief at basic rate only (20%): £1,800
- Additional tax cost: £1,800 per year
Example: A 20% taxpayer with the same mortgage
- Annual mortgage interest: £9,000
- Relief available: £1,800 (basic rate)
- No additional cost (already at the restricted rate)
This illustrates why Section 24 disproportionately affects higher earners. A solicitor or consultant with significant other income faces a much larger bill than a retired investor relying on rental income alone.
2026 Current Position: No Changes Expected
As of early 2026, there are no planned changes to Section 24. The policy remains in full effect, and HM Revenue & Customs continues to administer it as designed. However, several developments are worth monitoring:
Pressure from landlord groups: The National Residential Landlords Association (NRLA) and other bodies continue to lobby for reform. There's recurring talk of a return to full relief, but no government commitment exists.
Potential limited company exemption expansion: Landlords with sufficient capital often shift new acquisitions into limited companies to avoid Section 24. If pressure mounts, there could be policy changes affecting this route.
Interest rate sensitivity: With Bank of England base rates hovering around 4.75%, mortgage interest costs remain elevated compared to 2020–2021 levels. Any significant rate cuts would reduce the absolute impact of Section 24.
Strategies to Mitigate Section 24's Impact
Investors cannot eliminate Section 24, but several proven strategies reduce its sting:
1. Shift New Purchases to a Limited Company
New rental properties can be held through a limited company instead of personally. Companies receive full mortgage interest relief at corporation tax rates (currently 25% on profits over £250,000, 19% below). For a higher-rate taxpayer, this saves significant tax.
Setting up a property company is straightforward and inexpensive—typically £100–£300. Once established, all new rentals held through the company benefit from full interest relief. Existing personal holdings can be transferred, though this triggers capital gains tax and stamp duty considerations.
2. Maximise Capital Expenditure (CapEx)
Mortgage interest is restricted, but capital expenditure is deductible in full. Wear-and-tear allowance has been replaced with capital allowances for furnished holiday lets and certain other properties. Ensure you're claiming:
- Boiler and heating system replacements
- Kitchen and bathroom refits
- Roof repairs
- Electrical rewiring
- Furniture (for furnished lets)
Use the PropertyAlert.uk Expense Tracker Calculator to log these costs accurately, as proper documentation is essential if HMRC inquires.
3. Consider Your Mortgage Structure
Paying down the mortgage reduces interest owed and therefore reduces Section 24's impact. However, this ties up capital. Alternatively, some investors offset personal savings against buy-to-let properties using relief rules, though this is complex and needs professional advice.
4. Claim All Allowable Expenses
While mortgage interest is restricted, other expenses remain fully deductible:
- Letting agent fees
- Property management costs
- Maintenance and repairs
- Insurance
- Council tax (for certain properties)
- Accountancy fees
Many landlords miss legitimate deductions. Using a property accountant ensures nothing is overlooked.
When to Use a Limited Company
A limited company structure is increasingly essential for Section 24 planning. When structuring a purchase through a limited company, formation is straightforward with Provestor, which combines company setup with ongoing accountancy tailored to property businesses. Their team handles tax filing, Section 24 optimisation, and ensures you're using every available relief.
How Section 24 Affects Portfolio Returns
Section 24 materially alters buy-to-let economics. A property that yields 4% gross rental income might net only 2–2.5% after Section 24, depending on your tax bracket and mortgage size.
Impact on purchase decisions: Many investors now focus on higher-yielding properties (5%+ gross) to compensate for Section 24 costs. Regional property markets with better yields—particularly in the North and Midlands—have become relatively more attractive to buy-to-let investors.
Impact on refinancing: When remortgaging, some investors choose shorter terms to reduce interest costs, accepting higher monthly payments to shrink the Section 24 bill.
Professional Tax Planning Is Now Essential
Given Section 24's complexity and the sums involved, most serious landlords benefit from professional tax advice. Issues to discuss with an accountant:
- Whether a limited company would save money
- Optimal timing for property sales or purchases
- Relief interactions with other income sources
- Claiming loss relief against other income
- Planning for future interest rate changes
Use PropertyAlert.uk Property Tax Guide Calculator to understand your personal position before speaking to an accountant, ensuring you ask the right questions.
Looking Ahead: 2026 and Beyond
Section 24 remains a permanent feature of UK tax law. There's no official plan to change it, although pressure persists. Investors should plan assuming it stays in place indefinitely.
The best approach in 2026 is:
- Accept Section 24 as a permanent cost and factor it into yield calculations
- Use a limited company for new acquisitions if you're a higher-rate taxpayer
- Claim all allowable expenses and don't miss legitimate deductions
- Get professional accountancy support to optimise your structure
- Monitor base rates and interest-rate forecasts, as these directly affect the cash impact
Section 24 won't disappear, but with proper planning, its impact can be significantly reduced.
Next Steps
Understanding Section 24 is one piece of the buy-to-let puzzle. Use the PropertyAlert.uk tools to analyse property yields, track expenses, and run affordability scenarios that account for Section 24 from the start. Get your portfolio analysis right from the beginning, and you'll make better investment decisions that survive the tax landscape as it actually exists, not as landlords wish it would be.