Why Section 24 changes everything for landlords
Since the phased introduction completed in 2020/21, individual (non-company) landlords can no longer deduct mortgage interest from their rental income before tax. Instead, rental profit is taxed on the rent minus running costs only, and you receive a separate tax credit worth 20% of your finance costs. For basic-rate taxpayers the effect is broadly neutral; for higher and additional-rate taxpayers it can turn a paper profit into a loss.
This calculator applies the gov.uk rule directly: it taxes your rental profit without deducting interest, applies the 20% credit, and then compares the result against the pre-2017 full-deduction method so you can see the Section 24 cost as a single number.
What to enter
- Monthly rent - the gross rent you collect.
- Annual mortgage interest - interest only, not capital repayment.
- Other annual costs - letting fees, insurance, maintenance, ground rent, allowable expenses.
- Your marginal tax band - 20%, 40% or 45%, based on your total income including rental profit.
Worked example - higher-rate landlord
Rent 1,200/mo = 14,400/yr. Mortgage interest 6,000. Other costs 2,400.
Taxable rental profit (interest NOT deducted) = 14,400 - 2,400 = 12,000.
Tax at 40% = 4,800, minus 20% credit on 6,000 interest (1,200) = 3,600 tax.
Cash profit before tax = 14,400 - 2,400 - 6,000 = 6,000.
Net profit after tax = 6,000 - 3,600 = 2,400. Under the old rules tax would have been 2,400, so Section 24 costs this landlord 1,200 a year.
If you hold property through a limited company, Section 24 does not apply - companies still deduct mortgage interest as a business expense (though they pay Corporation Tax on profits and you pay tax again on dividends drawn). This calculator models personal ownership.