What is Section 24? How tax relief changes affect landlords

The restriction of buy-to-let mortgage tax relief, also known as Section 24, is a tax change that has impacted many landlords. 

When Section 24 was first announced, it was predicted that some buy-to-let landlords would sell their properties causing average rents to increase.

Many landlords that decided to stay in the market transferred the ownership of their property to a limited company to reduce their tax bill. That’s why the number of buy-to-let limited companies has reached a new high in six consecutive years.

Section 24 at a glance

Section 24 is a tax change that restricts the tax relief landlords can claim on buy-to-let mortgages.

Since its introduction, all of the rental income made from a property is taxed. 

This includes: 

• mortgage interest 
• mortgage arrangement fees
• early repayment fees
• interest on loans used to renovate a property

Landlords can claim back mortgage interest and other financial costs but only up to the basic income tax rate of 20 per cent. 

When was Section 24 introduced?

Section 24 changes were rolled out from 2017 and came into full effect in April 2020.

Before the first stage of the tax changes in 2017, landlords could deduct all of their mortgage interest from their rental income and pay tax solely on their profits.

But Between April 2017 and April 2020, mortgage interest tax relief was gradually reduced and ultimately replaced with a 20 per cent tax credit.

How have landlords responded?

Ever since it was announced, Section 24 has been extremely unpopular with buy-to-let landlords. It’s affected how much profit they make from their properties and left many paying much higher taxes.

Analysis from estate agency Hamptons shows the financial impact of Section 24 on landlords with a mortgage. 

Before the tax changes were introduced, a higher rate taxpayer who received £1,000 a month in rental income and paid £500 a month in mortgage interest would have paid 40 per cent tax (£2,400) on their £6,000 profit.

After the tax changes, the landlord would only receive a 20 per cent credit of £1,200 to deduct from their profit. This would leave them with a tax bill of £3,600 – a 50 per cent rise.                    

There have been several attempts to reverse Section 24, including a high-profile legal challenge led by Cherie Blair in 2016.

As it stands in 2025, the current Labour government has no plans to change Section 24.

The impact of Section 24 on landlords

Over recent years, many landlords have taken steps to minimise the impact of the Section 24 tax changes.

Some have chosen to work around it by remortgaging for a more competitive rate, while others have transferred ownership to their partner to avoid paying additional tax.

The most popular strategy has been to transfer ownership of a property to a limited company, while some landlords have opted to leave the market altogether.

Transferring property ownership to limited companies

One way landlords have looked to minimise the impact of the restriction of mortgage interest tax relief is to transfer ownership of their property to a limited company.

Landlords who incorporate their portfolio pay corporation tax instead of income tax, meaning they don’t pay more tax due to Section 24 and benefit from several other tax incentives.

Companies House data, analysed by Hamptons, shows a rising trend in incorporating buy-to-let companies in recent years:

There’s also been a surge in the number of buy-to-let mortgage products suitable for limited company landlords to reflect demand.

Further analysis from Hamptons shows that between the beginning of 2016 and the end of 2020, more companies were set up to hold buy-to-let properties than in the previous 50 years combined.

By February 2025, there were over 400,000 buy-to-let companies in the UK, up from around 200,000 in mid-2020.

Around 75 per cent of new rental property purchases in England and Wales go into a limited company structure, according to Hamptons.

Selling up and leaving the buy-to-let market

For some landlords, selling up and leaving the buy-to-let market was the most cost-effective option. Especially landlords with one or two properties as they’re more likely to be pushed into paying a higher tax rate than landlords with larger portfolios.

The Simply Business 2025 Landlord Report found that Section 24 continues to have an impact for many landlords.

23%

said the rising cost of being a landlord was their greatest challenge

34%

said reducing the tax burden is the most important action the government could take to support landlords

37%

 plan to sell one or more properties in the next 12 months

Raising tenants’ rent

Section 24 has put pressure on landlords’ finances and it’s potentially had a knock-on effect on tenants’ rent.

The table below shows the average national asking rent (excluding Greater London) tracked across six years by Rightmove.

Average rents increased significantly between 2017 and the end of 2021, by which time mortgage interest tax relief had been reduced in full.

And this figure has kept on rising, with Rightmove’s national average asking rent reaching £1,341 by Q4 2024.

It’s important to note that Section 24 is likely to have been one of many contributing factors to higher rents, such as:

• changes to stamp duty and capital gains tax
• new regulation such as the Renters’ Rights Bill
• high tenant demand and low housing stock

How can landlords reduce their tax bill?

For landlords who pay more income tax due to Section 24, the simplest way to reduce their tax bill is to transfer ownership of their property to a limited company. 

This means they would pay corporation tax instead of income tax. As a result, they would still be able to deduct buy-to-let mortgage interest payments as a business expense.

Other ways landlords can reduce their tax bill include:

• claiming as many allowable expenses as possible on your tax return
• using tax reliefs and allowance, such as the marriage allowance and private residence relief

Section 24 – landlord FAQs

What is Section 24?

Section 24 is a tax change that restricted the ability for landlords to claim buy-to-let mortgage interest, and other property finance, as tax-deductible expenses.

Instead of paying tax on profits, landlords must now pay tax on their gross rental income. The only finance relief they can claim is a 20 per cent tax credit on interest payments.

Section 24 was introduced between 2017 and 2020. It gets its name from Section 24 of the Finance (no. 2) Act 2015, and is also sometimes referred to as the ‘tenant tax’.

How does Section 24 affect landlords?

Section 24 reduces the finance deductions landlords can claim on their tax return. This means that many landlords, particularly those who pay income tax at the higher or additional rate, have higher tax bills than before. 

Can landlords avoid Section 24?

Landlords can limit the impact of Section 24 by transferring the ownership of their rental property to a limited company. 

This means they’d pay corporation tax instead of income tax, so they wouldn’t be affected by Section 24.

Does Section 24 apply to limited companies?

Section 24 doesn’t apply to limited companies. This is because limited companies pay corporation tax instead of income tax.

More useful guides for landlords

• Property inspection landlord checklist – how can you prepare?
• Allowable expenses for landlords – what can you claim?
• Buy-to-let mortgage affordability – a guide for landlords
• How much landlord insurance do I need?