UK only. Uses 2025/26 income tax bands for England, Wales and Northern Ireland, plus 2025/26 corporation tax rates. Scotland has different income tax bands.
UK Section 24 Buy-to-Let Tax Impact Calculator
Section 24 quietly turned a lot of profitable buy-to-lets into loss-making ones on paper. This calculator runs your numbers two ways: how much income tax you would have paid before April 2017 (when full mortgage interest was deductible), and how much you actually pay now under the 20% credit rules. It also shows what the same property would cost a limited company in corporation tax, which is the question every individual landlord eventually asks.
Explain like I'm 5 (what is Section 24, really?)
Before 2017, individual UK landlords could subtract every pound of mortgage interest from their rental income before working out the tax. From April 2020 onwards, you cannot. Instead, you add the full rental income (minus other expenses) to your taxable income, work out the tax, then HMRC gives you back 20% of the mortgage interest as a credit. If you are a basic-rate taxpayer the difference is small. If you are a higher-rate taxpayer the difference can be eye-watering, and the gross rent can shove you into the higher band even when, on a real cash-flow basis, you barely made anything.
Calculate
Enter your numbers, then press Calculate.
Headline comparison
- Pre-2017 rules: tax bill—
- Section 24 rules: tax bill—
- Section 24 hit—
- Pushed into higher band?—
Limited company comparison
- Company taxable profit—
- Corporation tax (2025/26)—
- Effective rate on profit—
Prove it
Press Calculate to see the full step-by-step working for both the pre-2017 and Section 24 scenarios, plus the corporation tax sum.
Income tax bands (2025/26, England, Wales, NI): personal allowance £12,570, basic 20% on £12,571–£50,270, higher 40% on £50,271–£125,140, additional 45% above £125,140. Personal allowance tapers by £1 for every £2 above £100,000. Section 24 credit = 20% of the lower of (a) finance costs, (b) property profit after expenses, (c) adjusted total income above personal allowance. Corporation tax 2025/26: 19% under £50,000, 25% over £250,000, marginal relief between (HMRC fraction 3/200).
Useful? Save this calculator: press Ctrl + D to bookmark it.
How Section 24 actually works
Before April 2017, an individual landlord worked out their tax the way any small business does: rental income minus mortgage interest minus other allowable expenses, the result was rental profit, that was added to other income, and the usual income tax bands applied. Mortgage interest was just another business cost. From April 2020 (after a four-year phasing-in period that ran from 2017), individual landlords can no longer deduct any of that mortgage interest from rental income before tax. Instead they add the larger gross figure to their other income, the band calculation runs on that bigger number, and then HMRC hands back a flat 20% of the mortgage interest as a tax credit at the end.
The credit is not 20% of mortgage interest in every case, though. The legislation caps it at 20% of the lower of three numbers: the finance costs themselves, the property profit after non-finance expenses, and adjusted total income above the personal allowance. That third cap is why a landlord with low non-property income, or a year of heavy rental losses, can end up with a credit smaller than they expected.
Why higher-rate landlords got hammered
The arithmetic is not subtle. A higher-rate taxpayer used to get 40% relief on every pound of mortgage interest (by deducting it before tax). Now they get 20%. Halving the relief on a £15,000 annual interest bill is a £3,000 a year tax rise on its own, before you even get to the band-pushing problem.
The band-pushing is the second hit. Because gross rental income (minus other expenses) goes onto the tax return rather than net rental profit, total taxable income often crosses the £50,270 higher-rate threshold under Section 24 when it would not have done under the old rules. Once part of your income is in the 40% band, the marginal effect of the next pound of rent is 40% tax minus 20% credit = a net 20% squeeze on a pound that, in cash-flow terms, you may never see (because most of it went to the lender). For landlords sitting between £100,000 and £125,140 of total income, the personal allowance taper kicks in too, and the effective marginal rate on rental income can hit 60% before the credit lands.
Why incorporation isn't a magic bullet
Section 24 only applies to individual landlords. A limited company gets full mortgage interest relief and pays corporation tax on the resulting profit. For 2025/26 that is 19% on profits up to £50,000, 25% on profits over £250,000, and a tapered rate (using HMRC's 3/200 marginal relief fraction) in between. On most buy-to-let portfolios, that is a meaningfully smaller tax bill than the post-Section 24 individual route, especially for higher-rate taxpayers.
The reason every accountant gets twitchy about a blanket "just incorporate" answer is that getting an existing property into a company is expensive. Three issues sting in particular. First, transferring property from you to your company is treated as a disposal at market value, so you pay capital gains tax on the gain since you bought it (currently 18% or 24% on residential property, depending on band). Second, the company "buying" the property pays the standard 5% additional Stamp Duty surcharge on second properties, which is a cash hit before any tax saving. Third, buy-to-let mortgages for limited companies are a smaller market with higher rates, higher arrangement fees, and often a personal guarantee from you anyway. There are reliefs (incorporation relief under TCGA 1992 s162, partnership routes, and so on) but they are situation-specific.
For a brand-new purchase the calculus is different and often cleaner. Buying through a company from day one avoids the CGT problem (there is no gain yet) and the SDLT cost is roughly the same as buying personally with the surcharge. New build-to-let portfolios are mostly being set up in companies for exactly that reason.
Common mistakes
People assume the 20% credit fully replaces the old deduction. It does not, except for landlords who would have paid basic rate on their rental profit anyway. Anyone in the higher or additional rate band is permanently worse off.
People forget that the credit is calculated on the lower of three numbers. If the rental year produces a small property profit, or if total income is barely above the personal allowance, the credit shrinks accordingly.
People underestimate how often gross rental income alone pushes them past £50,270. If you have a £40,000 salary and a £20,000 rental, your taxable income under Section 24 is closer to £58,000 than the £45,000 it would have been under the old net-profit method. That extra £8,000 above the threshold is taxed at 40%, and the credit only claws back 20% of it.
Edge cases worth flagging
Joint owners with their spouse can sometimes shift the income balance to use both personal allowances and basic-rate bands more efficiently, via a Form 17 declaration if the property is held as tenants in common in unequal shares. This calculator assumes a single landlord; if you are a couple, model each share separately.
Holiday lets that qualify as Furnished Holiday Lettings (FHL) used to be exempt from Section 24, but the FHL regime was abolished from April 2025. As of 2025/26, what used to be an FHL is now treated as ordinary rental property, with full Section 24 application.
If you have rental losses brought forward from previous tax years, those reduce the property profit before the credit calculation runs, which can shrink the credit further. The calculator assumes no carried-forward losses.
This is general information, not advice
Tax is full of edges, and no calculator that fits on a web page can model your specific position. If the numbers above suggest a meaningful difference between holding personally and holding through a company, talk to an accountant who specialises in property. They will look at your overall income, future plans, mortgage product availability, and the costs of any restructure, and tell you whether the saving is worth the upheaval. For most existing portfolios, the answer is more nuanced than the headline number suggests.
Related calculators
The rental side of the picture, plus the wider tax position.
Frequently asked questions
What is Section 24 and when did it start?
Section 24 of the Finance (No. 2) Act 2015 ended the deduction of mortgage interest for individual UK landlords. It was announced in the 2015 Summer Budget, phased in between April 2017 and April 2020, and replaced the deduction with a flat 20% basic-rate tax credit on finance costs. Limited companies are not affected.
Why does Section 24 hit higher-rate landlords harder?
Higher-rate taxpayers used to get 40% relief on mortgage interest by deducting it before tax. The replacement credit is capped at 20%, so they lose half the relief. Section 24 also pushes more landlords into the higher-rate band, because gross rental income (rather than net rental profit) is added to total taxable income.
Should I move my buy-to-let into a limited company?
Sometimes the maths says yes, often it says no. Companies still get full mortgage interest relief and pay corporation tax (19% under £50k profit, 25% over £250k, marginal relief in between). But transferring an existing property triggers capital gains tax, the 5% additional Stamp Duty surcharge applies on the company purchase, and limited-company mortgages tend to be more expensive. Talk to an accountant before deciding.
Does this calculator cover Scotland?
No. Scottish income tax bands are set by Holyrood and differ from the rest of the UK. This calculator uses England, Wales and Northern Ireland rates for 2025/26. Section 24 itself applies UK-wide, but the income tax bands feeding into it are different in Scotland.
How is the 20% tax credit calculated?
The credit is 20% of the lower of three figures: the finance costs themselves (mortgage interest), the property profit after expenses (excluding finance costs), and adjusted total income above the personal allowance. The "lower of" rule is what catches landlords with low non-property income off guard, because the credit can be smaller than the simple 20% of mortgage interest you might expect.