Section 24: how landlord mortgage interest relief works
If you let out residential property with a mortgage, the way you get tax relief on the interest changed some years ago — and it still trips people up. Here is what actually happens now.
The old way vs the new way
Once upon a time, a residential landlord simply deducted mortgage interest from their rental income as an expense, and paid tax on what was left. That is no longer how it works. For residential property, finance costs — mortgage and loan interest — are not an allowable expense you deduct from rent.
Instead, you get a basic-rate (20%) tax reduction based on your finance costs. In practice HMRC still taxes your rental profit *before* the interest, then reduces your tax bill by 20% of the interest. For a basic-rate taxpayer the end result is broadly similar to the old system — but for higher-rate taxpayers it can mean a noticeably larger bill, because relief is capped at 20% rather than your marginal rate.
On the SA105 UK property page, residential finance costs go in box 44 — not in the ordinary expense boxes. Any finance costs you could not use in a year (for example because your profit was too low) carry forward in box 45 to a future year.
Commercial property is different
The restriction applies to residential letting. If you let non-residential (commercial) property, finance costs on that are still a normal deductible expense — they go in box 26 on the SA105, not box 44. Keeping the two apart matters if you hold a mix.
What this means under Making Tax Digital
Because finance costs are treated so differently, MTD keeps them as their own category. Even if you are below the £90,000 threshold and could otherwise report simplified totals, you must still separate out residential finance costs — keep mortgage interest in its own line from day one. A tracker built for landlords does this automatically, so the box-44 reducer is calculated correctly at year end rather than being lost in a general 'expenses' total.
This change is widely called 'Section 24' after the part of the Finance Act that introduced it. HMRC's own guidance describes it as the finance-cost restriction for residential landlords, with worked examples.
Sources: HMRC 'Changes to tax relief for residential landlords' guidance and the SA105 notes on gov.uk. General information, not tax advice — a landlord's position depends on their own income and portfolio, so check yours with HMRC or an accountant.
General information, not tax or financial advice. Always confirm your own position with HMRC or a qualified adviser. This article was last checked against published gov.uk guidance on 13 July 2026. Rules and figures can change — always confirm your own position with HMRC or a qualified adviser.