Rental Income Tax Calculator UK 2025/26 — Landlord Tax, Section 24 & Allowable Expenses
Since April 2020, private landlords can no longer deduct mortgage interest as a business expense. Instead, they receive a 20% tax credit (Section 24 restriction). For higher-rate taxpayers this significantly increases the tax bill — sometimes pushing landlords into losses on paper while paying tax on their rental income. This calculator works out your true rental tax liability including the Section 24 impact.
Section 24 (full restriction since April 2020): mortgage interest is added back to profits; only a 20% tax credit is given. This costs higher-rate (40%) landlords significantly more than pre-2020. Property Income Allowance: £1,000/year property allowance available instead of expenses (if expenses are lower). Wear and tear allowance was abolished in 2016.
How Section 24 Changed Landlord Taxation
Before April 2017, landlords could deduct mortgage interest as a business expense, reducing their taxable profit pound-for-pound. Under the old rules, a landlord with £18,000 rental income and £8,000 interest would be taxed on £10,000 profit. Now, they are taxed on £18,000 (minus other expenses), then given a 20% credit of £1,600. For a 40% taxpayer this means paying £7,200 in tax minus £1,600 credit = £5,600 — compared to around £4,000 under the old rules. The increase is very significant for highly geared landlords.
Allowable Expenses — Full List
| Allowable | Not allowable |
|---|---|
| Letting agent / management fees | Mortgage interest (goes through S24 credit instead) |
| Repairs and maintenance | Capital improvements (new extension, new kitchen) |
| Insurance (buildings, contents, rent guarantee) | Your own time / unpaid labour |
| Service charges (leasehold) | Initial legal fees to buy the property |
| Ground rent | Stamp duty (capital cost) |
| Council tax & utilities (if paid by landlord) | Personal use proportion of any shared costs |
| Accountant / professional fees for rental | Costs relating to non-residential use |
| Advertising for tenants | Fines or legal costs for unlawful acts |
Incorporation — Should You Move to a Limited Company?
Since Section 24, many landlords have explored moving their rental portfolio into a limited company, where the old interest deduction rules still apply (companies deduct finance costs as a business expense). However, incorporation involves: Capital Gains Tax on the deemed disposal; Stamp Duty Land Tax on the transfer; complexity of ongoing company administration; higher mortgage rates for limited company buy-to-let; and eventual dividend tax when extracting profits. The decision is highly individual and requires specialist tax advice — there is no single right answer.
Frequently Asked Questions
Section 24 applies to individuals and partnerships letting residential property. It does not apply to: limited companies (which can still fully deduct finance costs); commercial property landlords; furnished holiday lets (though FHL rules changed significantly from April 2025 — FHLs are now treated as standard residential lettings for finance cost purposes). Basic rate taxpayers are less affected than higher-rate taxpayers because the 20% credit matches their marginal rate on the interest.
Yes — all your UK residential rental properties are treated as a single “property business” for tax purposes. Losses from one property can be offset against profits from another in the same year. Unused losses are carried forward to future years. However, rental losses cannot be offset against other income (such as employment income) unless you are a property professional with specific conditions met.