This calculator estimates the income tax you owe on rental income under current UK rules. It accounts for the Section 24 mortgage interest restriction, introduced by the Finance (No. 2) Act 2015, which replaced full mortgage interest deductibility with a 20 per cent basic rate tax credit from April 2020. The result shows your estimated tax under current rules alongside what your tax would have been under the pre-2020 rules, so you can see the direct cost of the restriction for your situation.
How to use this tool
- Enter your gross annual rental income and your allowable expenses, excluding mortgage interest.
- Enter the annual mortgage interest you pay. Do not include capital repayments.
- Enter any other income (salary, pension, or other earnings) before tax.
- Select the tax year. Your estimated tax due, Section 24 credit, and the pre-2020 comparison will appear below.
Understanding your results
Under current rules, tax is calculated on your rental profit plus other income at your marginal rate. A tax credit worth 20 per cent of your mortgage interest is then subtracted from the tax figure. If you pay income tax at 40 per cent or 45 per cent, this credit covers less of your mortgage interest cost than a full deduction would have done. The gap between what the credit saves you and what a full deduction would have saved is the Section 24 cost.
The pre-2020 rules figure shows what your tax would have been if mortgage interest had remained fully deductible from rental income before tax was calculated. The difference between the two figures is the direct financial cost of Section 24 for your inputs.
If the two figures are the same, you are a basic rate taxpayer. For basic rate taxpayers, the 20 per cent tax credit produces the same saving as a full deduction would have done at the basic rate.
This is an estimate based on the figures you entered. It does not account for all allowable expenses, tax reliefs, or individual circumstances. Consult a qualified tax adviser before making financial decisions.
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Legal context
Section 24 of the Finance (No. 2) Act 2015 changed the tax treatment of finance costs for individual residential landlords. The change was phased in between April 2017 and April 2020. From April 2020, individual landlords can no longer deduct mortgage interest and other finance costs from rental income before calculating tax. Instead, they receive a tax credit equal to 20 per cent of those costs. The credit is the same regardless of the landlord’s income tax rate. Section 24 applies to individual landlords. It does not apply to companies holding residential property, to furnished holiday lettings (which have separate rules), or to properties held in certain trust structures. The income tax thresholds used in this calculator apply to England, Wales, and Northern Ireland. Scotland uses different income tax rates and bands, which are not covered here.
Frequently asked questions
What is Section 24 and how does it affect landlord income tax?
Section 24 of the Finance (No. 2) Act 2015 removed the right for individual residential landlords to deduct mortgage interest from rental income before calculating tax. From April 2020, landlords instead receive a tax credit equal to 20 per cent of their finance costs. For a landlord paying income tax at 40 per cent, the credit is worth half what a full deduction would have been. This increases the effective tax bill for higher-rate taxpayers with mortgaged properties.
How does Section 24 affect basic rate versus higher rate taxpayers differently?
For a basic rate taxpayer paying income tax at 20 per cent, the Section 24 credit produces the same result as a full deduction would have done at the basic rate. There is no effective increase in tax for basic rate payers. For higher rate taxpayers paying 40 per cent, the credit covers only half the tax that would be saved by a full deduction. For additional rate taxpayers at 45 per cent, the credit covers even less. The impact scales with the tax rate above the basic rate band.
What expenses can a landlord deduct from rental income?
Allowable expenses include letting agent fees, maintenance and repair costs (not improvements), landlord insurance, accountancy fees related to the rental business, council tax and utilities paid by the landlord during void periods, and ground rent and service charges on leasehold properties. Mortgage interest is not deducted as an expense but handled separately as a tax credit. Capital improvements are not deductible as expenses but may qualify for other reliefs.
Is the wear and tear allowance still available to landlords?
No. The 10 per cent wear and tear allowance for furnished properties was abolished with effect from April 2016. It was replaced by replacement of domestic items relief under the Finance Act 2016. This allows landlords to deduct the cost of replacing items such as carpets, white goods, and furniture on a like-for-like basis. The deduction applies to the replacement cost of an equivalent item, not an upgrade, and only when the old item is removed from the property.
Does the personal allowance apply to rental income?
Yes. The personal allowance (£12,570 for the 2024/25 tax year) applies to total income, including rental profit, employment income, and pension. Rental profit is added to other income to determine the total taxable income figure. If your only income is from renting and it falls below the personal allowance, you will owe no income tax on it. If employment income already uses the personal allowance, your rental profit will be taxed from the first pound at your marginal rate.
Do landlords pay National Insurance on rental income?
No. Rental income from residential property is not subject to National Insurance contributions. HMRC treats residential letting income as investment income rather than earnings from a trade. Neither Class 2 nor Class 4 National Insurance applies to rental profit. This also means rental income does not count toward the qualifying earnings needed to build a State Pension entitlement. Landlords who run a furnished holiday let business may be treated differently, though the FHL regime was abolished from April 2025 under the Finance Act 2024.
What are the self-assessment filing requirements for landlords?
Landlords earning gross rental income above £2,500 per year must register for self-assessment and file a tax return. If gross income is between £1,000 and £2,500, HMRC may collect tax through a PAYE coding notice adjustment, but you should notify HMRC regardless. The self-assessment registration deadline is 5 October following the end of the tax year in which the rental income began. Returns for the year ending 5 April must be filed online by 31 January the following year.
What is lettings relief and can I still claim it?
Lettings relief reduces the capital gains tax liability when selling a property that was previously let. Since April 2020, it applies only where the owner and tenant lived together in the property at the same time. Before April 2020, it applied more broadly to any period of letting. The maximum relief is £40,000 per owner, capped at the amount of private residence relief available and the gain from the letting period. Most landlords of properties they have never lived in cannot claim lettings relief under the post-2020 rules.
Are furnished holiday lets treated differently for income tax purposes?
Furnished holiday lets (FHLs) that met HMRC’s qualifying conditions were previously treated as a trade for income tax purposes, allowing full mortgage interest deductibility and capital allowances. From April 2025, the FHL regime was abolished and FHL income is now taxed under the same rules as standard residential letting income. Source: Finance Act 2024. If you previously operated as an FHL, confirm your position with a qualified tax adviser.
How do I reduce my income tax liability as a landlord without incorporating?
Within the existing rules, the main options are: ensuring all allowable expenses are claimed, including agent fees, insurance, maintenance, and void period costs; claiming replacement of domestic items relief for furnished properties; making pension contributions to reduce adjusted net income and potentially stay within the basic rate band; and using the £1,000 property income allowance if gross income is low. Transferring a share of the property to a spouse or civil partner to spread income between two taxpayers is another approach, but seek advice from a qualified tax adviser before acting on this.