Section 24

Before April 2017, residential landlords deducted mortgage interest from rental income as a normal expense and paid tax on the net profit. Section 24 phased that out between April 2017 and April 2020. Since April 2020, mortgage interest cannot be deducted at all — instead, a flat 20% credit is applied against the tax bill on the full rental income.

The practical effect varies sharply by tax band. Basic-rate (20%) landlords are roughly neutral — the credit equals the deduction they used to get. Higher-rate (40%) and additional-rate (45%) landlords pay substantially more tax on the same underlying profit. The change drove a wave of incorporations into SPVs from 2017 onwards.

Section 24 applies to residential property only. Commercial-let mortgage interest remains fully deductible. Furnished Holiday Lets sat outside Section 24 until the FHL tax regime was abolished from April 2025, bringing FHLs into the standard residential rules and Section 24’s scope.

Under MTD ITSA, mortgage interest is still recorded as an expense in quarterly summaries but flagged as restricted finance costs; the 20% credit is applied at the year-end final declaration, not the quarterly stage. LandlordFlow records mortgage interest separately by default so the quarterly summary and year-end credit both come out right.

LandlordFlow is not an HMRC-recognised MTD filing tool; the actual Section 24 credit application happens at submission via your accountant or filing software.