No. Section 24 applies to individual landlords, not to limited companies. Individuals get relief on their mortgage interest only at the basic rate, while companies sit outside Section 24 and get relief for it through corporation tax, and that gap is the main tax reason landlords weigh up buying through a limited company.
The restriction on finance cost relief, usually called Section 24, is settled law, with a rate change coming in 2027. It quietly determines how most portfolios are structured, and it matters more now that borrowing costs have risen.
In short
- Section 24 restricts individual landlords’ mortgage interest relief to the basic rate; companies sit outside it and get relief through corporation tax.
- Relief is given on the lowest of the finance costs, the property business profit and adjusted total income, not simply 20% of the interest bill.
- From 2027 to 2028, Section 24 relief moves to a new 22% property basic rate, with property income taxed at 22%, 42% and 47%.
- Companies get relief for interest in full through corporation tax, subject to a cap that only bites above £2 million a year of group net interest.
What Section 24 actually says
HMRC’s position is unambiguous. For individual landlords letting residential property, income tax relief on residential property finance costs is restricted to the basic rate of income tax. It was phased in from 6 April 2017 and has applied in full since 6 April 2020. Note also that the old carve-out for furnished holiday lettings ended on 5 April 2025, so holiday lets are no longer an exception.
The restriction covers interest on mortgages and loans, overdrafts, alternative finance returns, and the fees of getting or repaying that borrowing. It is not limited to the mortgage itself.
Mechanically, finance costs are no longer deducted from rental income as an expense. Instead the landlord receives a basic rate reduction against their tax bill. A higher or additional rate taxpayer therefore pays tax on rental income calculated before finance costs, and gets relief at the basic rate.
Importantly, that relief is given on the lowest of three figures:
- the finance costs themselves;
- the profits of the property business; and
- adjusted total income.
It is not simply 20% of your interest bill.
How Section 24 raises the tax bill
Because finance costs are no longer deducted before tax is calculated, the taxable rental figure is larger than the actual profit. The first effect is a straightforward higher tax bill for anyone paying above the basic rate.
The second, less obvious, is that the inflated figure can push a landlord into a higher band, or across thresholds affecting other entitlements, on income never actually received.
The higher the leverage, the worse the distortion. A lightly geared portfolio barely notices.
A heavily geared one can, in the extreme, show taxable profit on a property that is losing money in cash terms.
That is also where the three-way cap bites hardest: if the property business makes little or no profit, the relief available in that year can be reduced to nil, with the unrelieved amount carried forward rather than lost.
With mortgage pricing well above the sub 3% era of a few years ago, that arithmetic is considerably less theoretical than it was when rates were low.
Why companies sit outside Section 24
HMRC is explicit that the restriction does not apply to companies. UK resident and non-UK resident companies continue to receive relief for finance costs in full, under the corporation tax rules for loan relationships rather than through the basic rate tax reduction.
A separate cap, the Corporate Interest Restriction, can apply to a group, but no restriction arises where the group’s net tax-interest expense is below £2 million a year.
Being outside Section 24 is what puts a limited company on the table for a geared portfolio. A corporate landlord gets relief for its interest through corporation tax, subject to that cap, and is taxed on the actual profit. An individual higher rate taxpayer does not.
It does not follow that a company is right for everyone, and we set out when buying through a limited company pays separately. Companies carry their own costs, lender restrictions and extraction problems when you want the money personally, and moving existing property into one has tax consequences of its own.
The point is narrower: the gap is real, it is created by this rule, and it is why the question comes up on nearly every portfolio purchase.
Finance cost relief changes in 2027
Anyone modelling a structuring decision now needs to look past the current numbers. The Finance Act 2026, which received Royal Assent in March 2026, inserts new provisions into the Income Tax Act 2007 creating a separate property basic rate, property higher rate and property additional rate, with property income charged at those rates rather than the ordinary ones.
The statute leaves the actual rates to be set by Parliament each year, and section 7 of the same Act sets them for 2027 to 2028:
You can read the 2027 property income rates in full.
Section 24 relief changes at the same time. Schedule 1 to the Act amends the relief so that it is given at the property basic rate instead of the basic rate, which takes it from 20% to 22% for 2027 to 2028.
The mechanics above are right for today, but incorporation decisions run longer than one tax year, so model the post-2027 position too.
What this means for property investors
Model the tax on the structure you will actually use, before you agree a price. The same building can produce materially different net returns personally versus corporately for a higher rate taxpayer. Underwriting on pre-tax yield alone hides that entirely.
Leverage now carries a tax cost as well as an interest cost for individuals. Those two costs compound. When you are stress testing a purchase against higher rates, the tax effect of the restriction should be in the same model rather than considered separately afterwards.
Do not restructure an existing portfolio on general principle. Incorporation is normally a disposal, though incorporation relief under section 162 of the Taxation of Chargeable Gains Act 1992 can defer, not remove, the capital gains charge where a landlord genuinely runs a business rather than passive letting.
That is a high bar which HMRC scrutinises, and since 6 April 2026 the relief has to be actively claimed within a time limit rather than applying automatically. Stamp duty generally cannot be relieved on this kind of transfer.
Whether it is worth it depends on gains, on stamp duty, on your rate of tax and on your intentions for the income. This is exactly the question to put to an accountant with your actual numbers.
Where the rule bites hardest, yield matters most. The restriction penalises income that is heavily financed, so assets with genuinely strong rental cover absorb it better. That is one reason HMOs and multi-unit blocks keep their appeal for geared buyers even with the extra management burden.
Plan on it staying. Reversal is a perennial sector ask with no legislation behind it.
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This article explains published HMRC rules and is not tax advice. Take professional advice on your own circumstances before acting.