Section 24 Explained for Landlords: What You Actually Need to Know in 2026

Section 24 of the Finance (No. 2) Act 2015 – commonly called the “landlord tax” – has been fully phased in since April 2020. Yet many landlords remain unclear on exactly how it works, how much it is costing them, and what decisions it should be informing. If you own mortgaged buy-to-let properties and have not reviewed your tax position recently, this guide is worth reading carefully.

LP Exchange is not a tax adviser. This article is intended to help landlords understand the mechanics of Section 24, not to replace professional advice. We publish it because understanding your true net yield, after tax, is essential context for any decision about whether to hold, sell, or restructure a portfolio.

Before Section 24 was introduced, landlords with mortgaged buy-to-let properties could deduct their mortgage interest payments from rental income before calculating their tax liability. This meant that higher-rate taxpayers could effectively shield a significant portion of their income from the 40% tax band.

Section 24 removed this deduction. In its place, landlords now receive a basic-rate tax credit equal to 20% of their mortgage interest payments – regardless of whether they are a basic-rate or higher-rate taxpayer.

For basic-rate taxpayers, the practical impact is broadly neutral. For higher-rate taxpayers, the impact can be substantial. In some cases, it has made previously profitable properties unprofitable after tax.

Consider a landlord who is a higher-rate (40%) taxpayer with a single buy-to-let property:

In this example, Section 24 reduces after-tax profit from £3,600 to £1,600: a reduction of 56%. For landlords with higher LTV ratios or larger mortgage books, the impact can be more severe.
In some cases – particularly for landlords who are higher-rate taxpayers with highly mortgaged properties – Section 24 creates a situation where the landlord pays tax on income that, in cash terms, does not exist as profit.

Section 24 disproportionately affects:

• Higher-rate (40%) and additional-rate (45%) taxpayers
• Landlords with high loan-to-value (LTV) mortgages, where interest payments are a large proportion of rental income
• Landlords with multiple properties held in personal names (as opposed to limited company structures)

Basic-rate taxpayers are broadly unaffected because the 20% tax credit matches the rate at which they would have claimed relief anyway.

There are broadly three responses to Section 24 that landlords and their advisers discuss:

1. Incorporation: Moving Properties Into a Limited Company

Limited companies are not subject to Section 24 — corporate tax is calculated differently. However, incorporation is not straightforward for an existing portfolio. Transferring properties into a company typically triggers Stamp Duty Land Tax and Capital Gains Tax at the point of transfer, which can be prohibitive. Legal and tax advice is essential before this route is pursued.

2. Increasing Rents

Some landlords have sought to offset Section 24’s impact by increasing rents where the market permits. This is not universally available — rental market conditions vary significantly by area — and creates its own risks in terms of tenancy stability.

3. Selling Properties That Are No Longer Viable

For landlords whose Section 24 position has made individual properties or entire portfolios unviable after tax, sale is increasingly the preferred option. A significant part of the growth in landlord exits since 2020 is due to Section 24.

LP Exchange exists precisely for landlords affected in this way. A tenanted sale through LP Exchange enables a clean, efficient exit without the eviction, void period, and vacant possession complexity that accompanies an open-market sale.

The landlords who come to LP Exchange are, in many cases, making complex financial decisions under regulatory pressure. Understanding Section 24 — and being willing to explain it clearly — is part of what makes LP Exchange more than a listing service. 

Does Section 24 apply to properties held in a limited company?

No. Section 24 applies only to properties held in personal names (or partnerships). Limited companies calculate tax on property income under corporation tax rules, which allow full deduction of finance costs. This is why many landlords have considered incorporation — though the transfer costs can be significant.

Can I offset any other costs against rental income?

Yes. Allowable expenses include letting agent fees, repairs and maintenance, insurance, ground rent and service charges, and professional fees (e.g., accountancy). Capital expenditure on improvements is generally not allowable against income, though it may affect Capital Gains Tax calculations on sale. A tax adviser can confirm what applies to your specific portfolio.