If you’re a landlord in the UK, you’ve likely heard of Section 24 — the tax rule that restricts mortgage interest relief for property investors. Since its introduction, it’s had a huge impact on landlords’ profits, particularly those with buy-to-let mortgages.

At Modus Accountants, we work with landlords across the UK to help them understand and manage the effects of Section 24. Here’s what you need to know in 2025.

What Is Section 24?

Section 24 of the Finance (No. 2) Act 2015 phased out full mortgage interest relief for landlords.

Before Section 24:

Landlords could deduct 100% of mortgage interest from rental income before calculating tax.

After Section 24 (fully in effect from April 2020):

Landlords can only claim a 20% tax credit on mortgage interest, regardless of their tax band.

Who Is Affected?

Higher and additional-rate taxpayers are most impacted, as they previously received 40% or 45% relief but now only get 20%.

Landlords with high mortgage borrowing face the biggest squeeze.

Basic-rate taxpayers may find themselves pushed into higher tax brackets due to how taxable profits are now calculated.

Example – The Impact in 2025

Imagine a landlord earning £30,000 rental income with £20,000 mortgage interest:

Before Section 24:

Taxable profit = £10,000

If a 40% taxpayer, tax = £4,000

After Section 24:

Taxable profit = £30,000 (no deduction for mortgage interest)

Tax at 40% = £12,000

Less 20% tax credit on interest (£4,000)

Final tax bill = £8,000

Result: Double the tax compared to the old system.

Strategies to Mitigate Section 24

Landlords aren’t powerless — here are some common approaches we advise on:

Incorporating into a Limited Company

Companies can still fully deduct mortgage interest as an expense.

Profits taxed at 25% Corporation Tax rather than personal rates.

Restructuring Borrowing

Reducing high mortgage leverage may lessen the impact.

Spousal Transfers

Transferring ownership shares to a lower-taxed spouse can reduce the overall bill.

Diversification

Exploring Furnished Holiday Lets (FHLs), which may qualify for different tax reliefs.

How Modus Help Landlords

At Modus, we specialise in supporting property investors across Witney, Carterton, Oxford, and beyond. We’ll:

Review your property portfolio and mortgage position.

Model the tax implications of Section 24 for you.

Advise whether incorporation, restructuring, or FHLs are suitable.

Handle annual accounts, VAT (where relevant), and personal tax returns.

Next Steps

If Section 24 has increased your tax bill, you’re not alone — but with the right advice, there are strategies to protect your profits.

📞 Call us on 01993 225030 or 📧 email hello@modus-accountants.co.uk to arrange your free landlord tax consultation.