When interest rates rise, landlords feel it twice: once in their mortgage payments and again in their tax bill, because of Section 24.
Why higher interest hurts more than it should
Individual landlords can't deduct mortgage interest from their rent. They get a basic-rate tax credit instead. So when interest goes up, your real profit falls but your taxable profit doesn't. A higher-rate landlord can end up paying tax even when the rent barely covers the costs.
An example
Rent £36,000, costs £6,000. If interest rises from £8,000 to £18,000, real profit falls from £22,000 to £12,000. Taxable profit stays at £30,000. For a higher-rate taxpayer in 2027/28, tax at 44% on £30,000 is £13,200, less a 24% credit on £18,000 (£4,320): £8,880 of tax on £12,000 of real profit.
What landlords look at
Ownership, structure and how income is shared can all change the tax position. Each option has costs and risks, so it's worth getting advice on your own figures.
See your own figures with the Section 24 calculator, or speak to a landlord tax specialist.
Frequently asked questions
Do I get tax relief on higher mortgage interest?
Individual landlords get a tax credit at the basic rate (20%, rising to 24% from April 2027) rather than deducting the interest. Higher-rate taxpayers don't get relief at their full rate.
Can unused finance cost relief be carried forward?
Yes. Where the credit can't be fully used in a year, the unused amount can generally be carried forward to later years, subject to the rules.
Does a company get full relief for interest?
A company deducts interest in full when working out its taxable profit. Whether a company suits you depends on many other factors.
Request a call back
Tell us a little about your situation and we'll call you, usually within one working day, to understand what you need. If it would help, we'll then put you in touch with a landlord tax specialist. We'll always tell you who they are before passing on your details. We don't give advice ourselves, and there's no obligation.