Section 24 of the Finance (No. 2) Act 2015 stops UK landlords from deducting mortgage interest as an expense. Since 2020/21 you get a flat 20% basic-rate tax credit instead, which means higher-rate (40%) and additional-rate (45%) taxpayers now pay tax on mortgage interest they never actually keep. Limited companies are exempt and deduct interest fully against corporation tax. This calculator quantifies your gap, live, using 2025/26 rates for England, Wales and Northern Ireland.
The bottom line
Limited company structure keeps you ~£1,367/year more in hand.
At a marginal higher-rate (40%) tax position, holding this property in a limited company would leave you with about £1,367/year more in hand after all taxes — Section 24 hits you harder personally because you're paying tax on mortgage interest you can't deduct.
Section 24 applies: mortgage interest gets a 20% credit, not a full deduction.
Section 24 does not apply. Mortgage interest is a normal expense. Pay corporation tax, then dividend tax on extraction.
How much of the rental profit you actually keep, after all taxes.
This is an estimate, not advice. UK tax is complex. The calculator uses 2025/26 rates for England, Wales and Northern Ireland; Scottish rates differ.
Before incorporating a buy-to-let, a tax advisor should also weigh: capital gains tax on transferring an existing property to a Ltd, the typically higher mortgage rates for Ltd structures, annual accountancy costs (£500-£1,500), the dividend extraction strategy that minimises tax in your specific case, and how Section 24 interacts with child-benefit clawback and the personal-allowance taper at £100K.
We assume dividend extraction of all post-corporation-tax profit. If you retain profits inside the company (e.g. to pay down the loan), the Ltd advantage grows further.
Until April 2017 UK landlords could deduct mortgage interest from rental income before tax, same treatment as any other allowable expense. Section 24 of the Finance (No. 2) Act 2015 phased this out: a quarter less relief each year between 2017/18 and 2019/20, then a complete switch from 2020/21 onwards. Mortgage interest is no longer a deduction. It is a flat 20% tax credit applied after the income tax bill has been computed on the gross rental income.
For basic-rate taxpayers the change is broadly neutral: 20% deduction, 20% credit, same answer. For higher-rate (40%) and additional-rate (45%) taxpayers it isn't. They now pay tax at their marginal rate on the rental income (including the portion that pays the mortgage interest) and get a flat 20% back. The gap is the Section 24 tax hit.
Income tax base: gross rent minus non-interest expenses (letting agent fees, insurance, repairs, ground rent, accountancy)plus your other taxable income. The mortgage interest is not deducted from this base.
Tax bands applied: standard income-tax bands. The rental income sits on top of your other income, so it might be taxed at the higher rate even if your salary alone is well under £50,270.
Section 24 credit: 20% of the lower of (mortgage interest, rental profit after non-interest expenses). This reduces the final tax bill but cannot make it negative.
Corporation tax base: gross rent minus all expenses including mortgage interest. No Section 24. Profit is taxed at corporation tax rates: 19% on profits up to £50,000, sliding through marginal relief between £50,000 and £250,000, 25% above.
Extraction tax: when you pull the post-tax profit out as dividends, you pay dividend tax on top: 8.75% / 33.75% / 39.35% depending on which band the dividend sits in (it stacks on your other personal income). A £500 dividend allowance sits in front of all bands.
The Ltd structure wins decisively when two conditions both hold: you are a higher- or additional-rate taxpayer on your other income, and the property is heavily mortgaged (interest is a large share of rental income). Both conditions push more of your rental income above the basic rate while Section 24 prevents you from netting off the interest.
The Ltd structure stops being a clear winner when you actually need the cash out. Inside the company, profit grows cheaply (19% CT). The moment you extract via dividends, you stack 8.75-33.75% on top. If your goal is current income (not long-term reinvestment), the personal route often catches up or wins.
The Ltd structure can lose outright when you have no salary (the full personal allowance is wasted because the dividend allowance is only £500) or when you'd be transferring an existing mortgaged property into a Ltd: capital gains tax on the deemed sale, plus stamp duty on the corporate "purchase", can easily eat several years of Ltd tax savings.
In most cases no, 20% relief either way. The exception is when the rental income pushes you across the £50,270 boundary into higher-rate territory; then a portion of the rental is taxed at 40% while the relief is still capped at 20%.
No. Section 24 applies regardless of when the mortgage was taken out. The only escape is structural: owning through a limited company, or paying down the mortgage entirely.
No. Section 24 applies only to residential let property held personally. Commercial property and furnished holiday lets are excluded, although the latter status was tightened from April 2025.
Both owners apply Section 24 to their share. If one is a basic-rate taxpayer and the other higher-rate, the higher-rate owner takes the bigger hit on their share.
No. Section 24 applies only to individuals. A limited company deducts mortgage interest in full as an expense before corporation tax.
Personal allowance £12,570 (tapered above £100K). Basic rate (20%) up to £50,270. Higher rate (40%) up to £125,140. Additional rate (45%) above. Corporation tax: 19% small-profits up to £50K, marginal relief between £50K-£250K, 25% main rate above. Dividend tax: 8.75% / 33.75% / 39.35%, £500 allowance.
Full background on the policy, the timeline, and how the change has reshaped UK buy-to-let since 2017.
Cross-check the gross and net yield after factoring in the tax position this calculator shows.
If you're considering buying a new BTL or moving one to a Ltd, the SDLT bill is the next number to know.
Section 24 hits HMO landlords harder per pound of rent. Compare the two structures.
Get a full property report covering valuation, rental yield, flood, planning history, EPC and the local freeholder picture. From £9.99.
Search a UK addressNot tax advice. This calculator is for general information only. Tax treatment depends on your individual circumstances and may change. Speak to a qualified UK tax adviser before making any decision about the structure under which you hold rental property. Figures use 2025/26 rates for England, Wales and Northern Ireland; Scottish income tax bands differ.