What is Section 24 for landlords?
Section 24 limits tax relief for residential landlords' finance costs, such as mortgage interest. Instead of deducting them from rental income, an individual landlord gets a tax reduction at the basic rate, currently 20%. The restriction started on 6 April 2017 and has been fully in place since 6 April 2020.
Figures checked against gov.uk on . General information, not tax advice.
How the reduction is calculated
gov.uk says the reduction is the basic rate value, currently 20%, of the lowest of three figures: finance costs not deducted from rental income in the tax year (plus any brought forward), the property business profits for the year after using any brought forward losses, and your adjusted total income above the Personal Allowance.
Limits worth knowing
If the reduction is capped by profits or adjusted total income, the unused difference carries forward into later years. The reduction cannot be used to create a tax refund.
A higher-rate taxpayer therefore gets relief at 20% rather than 40%, which is why Section 24 matters most to them. If you claim the finance cost tax reduction on a residential property, you cannot also use the £1,000 property allowance.