£2,511
United Kingdom
Section 24 calculator — buy-to-let tax after mortgage interest
Section 24 taxes the rent before the mortgage is paid. This is what that costs you.
For individual landlords in England, Wales and Northern Ireland, mortgage interest is no longer deducted from rental profit. Instead it earns a tax credit at the basic rate — 20% now, 22% from April 2027. This calculator works out the tax your rental actually adds to your bill using the real bands and your other income, including the effects most Section 24 calculators miss: the carried-forward interest cap, the loss of personal allowance above £100,000 and the High Income Child Benefit Charge.
-£1,349 a year after tax
The rent covers the mortgage — then tax of £2,511 takes you below zero. You pay tax on money you never keep.
£1,162
-£1,349
| 2026/27 | 2027/28 | |
|---|---|---|
| Taxable property profit (interest not deducted) | £11,662 | £12,012 |
| Income tax on that profit | £4,611 | £4,991 |
| Finance cost relief at 20% | -£2,100 | -£2,310 |
| Child Benefit charge caused | £0 | £0 |
| Personal allowance lost | £0 | £0 |
| Interest carried forward | £0 | £0 |
| Tax caused by the property | £2,511 | £2,681 |
| Cash flow after tax | -£1,349 | -£1,169 |
Worked example
With the default inputs — £16,500 rent, £210,000 of interest-only borrowing at 5%, and a salary of £50,000 — the property makes a profit of £11,662 before interest. Under Section 24 that whole amount is taxable: it sits on top of the salary, so most of it falls in the higher-rate band, costing £4,611.
The £10,500 of mortgage interest then earns a 20% credit of £2,100. Net effect: the rental adds £2,511 to the tax bill in 2026/27. The cash position after the mortgage is £1,162 before tax and -£1,349 after it — the landlord pays tax on a profit they never receive.
In year two, 2027/28, the rental adds £2,681. Part of the rise is rent and cost growth; the rest is the new property rates — 42% instead of 40% in the higher band, partly offset by relief at 22% instead of 20%. The 2027 calculator isolates the rate change on identical figures.
How Section 24 is calculated
Section 24 of the Finance (No. 2) Act 2015 restricted finance costs for residential lettings. Since 2020/21 none of your mortgage interest is deductible in working out rental profit. Instead, section 274AA of ITTOIA 2005 gives a reduction in your tax bill equal to the basic rate multiplied by the lowest of three amounts:
- your finance costs for the year plus any unrelieved amount brought forward;
- your property profits for the year (after any property losses brought forward);
- your adjusted total income above your personal allowance (excluding savings and dividend income).
Whatever is not relieved because of the second or third cap is carried forward to the next year. HMRC works through the steps in PIM2058; our engine reproduces HMRC's worked example exactly and is tested against it.
From 2027/28, Finance Act 2026, Schedule 1, paragraph 40 replaces the basic rate with the new property basic rate, so the credit becomes 22%. The same Act (section 6) treats property income as the top slice of your income and sets your personal allowance against salary or pension first.
The hidden effects
Your salary is taxed first and the rental sits on top of it, so the property is taxed at your highest rate. KeptOffer shows what the salary alone leaves you. Because interest is no longer deducted, your taxable income is higher than your real profit. That can push you over thresholds that depend on total income:
- £100,000 allowance taper. Your personal allowance falls by £1 for every £2 of adjusted net income above £100,000 (GOV.UK). Between £100,000 and £125,140 each extra pound of rental profit is effectively taxed at 60%.
- High Income Child Benefit Charge. From £60,000 of adjusted net income, 1% of Child Benefit is clawed back for every £200 (GOV.UK). Enter the Child Benefit you receive to include it.
- Losses and carry-forwards. A loss is carried forward against future property profits; interest that could not be relieved is carried forward too. The table above shows both.
What this calculator does not include
- Scottish income tax bands (the calculator uses the rates for England, Wales and Northern Ireland).
- Savings and dividend income, pension contributions or Gift Aid, which change adjusted net income.
- Properties held in a limited company — companies deduct interest in full and pay corporation tax instead.
- Furnished holiday lets, Rent a Room relief, the £1,000 property allowance and replacement of domestic items relief.
- Joint ownership: enter your share of rent, costs and interest.
Questions landlords ask
Can I still claim mortgage interest on a buy-to-let?
Not as an expense. You get a tax reduction equal to 20% of the interest (22% from 2027/28), subject to the three-way cap. Higher and additional-rate taxpayers therefore get relief at a lower rate than the tax they pay on the profit.
Does Section 24 affect basic-rate taxpayers?
Often less, but it can: because interest is not deducted, the higher taxable profit can push part of your income into the higher-rate band. The calculator tests this with your actual salary.
What happens to interest I can't get relief for?
It is carried forward to future years for the same property business and added to the following year's finance costs, as HMRC's PIM2058 example shows.
Is repaying capital deductible?
No. Only interest and other finance costs qualify for the credit. Capital repayments reduce your cash flow but not your tax.
Does this apply to limited companies?
No. Section 24 applies to individuals (and trusts). Companies deduct finance costs and pay corporation tax, then tax again when profits are extracted.
Tax rules: UK registry v1.0.0, last reviewed 2026-09-30. Figures in the text use the default inputs above. Sources and method.