¿Los intereses hipotecarios siguen siendo deducibles de impuestos para los propietarios que alquilan viviendas?

It is one of the most frequently asked questions we receive from landlords, and the honest answer is: it depends on how you own your properties. The short answer for most individual landlords is no, not in the way it used to be. But the full picture is more nuanced than a simple yes or no, and understanding the distinction between a deduction and a tax reduction is essential if you want to manage your rental tax bill effectively. The Old Rules: When Mortgage Interest Was Fully Deductible For many years, mortgage interest was treated in the same way as any other allowable expense for a residential landlord. If you received £15,000 in rent and paid £9,000 in mortgage interest, you were taxed on the net profit of £6,000. The interest was deducted before the tax calculation even began, which meant higher-rate taxpayers effectively received 40% relief on their finance costs, and additional rate taxpayers received 45% relief. It was straightforward, logical, and broadly consistent with how business expenses are treated across the rest of the tax system. That all changed with the Finance (No. 2) Act 2015, which introduced what is commonly known as Section 24. The changes were phased in gradually between 2017 and 2020, but since April 2020 the old rules have been gone entirely for individual landlords letting residential property. What the Rules Say Now Under the current rules, individual landlords can no longer deduct mortgage interest, or any other finance costs, from their rental income when calculating their taxable profit. Instead, they receive a basic rate tax reduction equal to 20% of the lower of three figures: their finance costs for the year, their property business profits, or their adjusted total income above the personal allowance. The practical effect of this change is significant. Your taxable rental income is now calculated without any deduction for mortgage interest, which means your profit figure for tax purposes is higher than your actual cash profit. You then receive a credit against your tax bill worth 20% of your qualifying finance costs, but if you pay tax at 40% or 45%, that credit only partially offsets the tax you owe on the interest-funded portion of your income. The gap between what you receive and what you would have received under the old rules represents a real and permanent increase in your tax liability. A Worked Example The numbers make this clearer. Suppose you have rental income of £18,000, allowable expenses (other than finance costs) of £2,000, and mortgage interest of £10,000. Your marginal tax rate is 40%. Under the old rules, your taxable profit would have been £18,000 minus £2,000 minus £10,000, giving £6,000. At 40%, your tax bill on the rental income would have been £2,400. Under the current rules, your taxable profit is £18,000 minus £2,000, giving £16,000. At 40%, the tax on that is £6,400. You then receive a tax reduction of 20% of £10,000, which is £2,000. Your net tax bill is therefore £6,400 minus £2,000, which is £4,400. That is £2,000 more than under the old rules, on exactly the same property, with exactly the same mortgage. For an additional rate taxpayer, the additional cost would be even greater. And this calculation does not yet account for the secondary effects of having a higher taxable income figure, which we will come to shortly. The Knock-On Affects You Might Not Have Considered One of the most damaging aspects of Section 24 is not the direct tax increase itself, but the way it inflates your adjusted net income, the figure used to determine eligibility for a range of allowances and reliefs. Because mortgage interest is no longer deducted from your rental income, your total income for tax purposes is higher than your actual economic income, and this can have consequences that go well beyond the rental tax calculation. If your adjusted net income exceeds £100,000, your personal allowance begins to taper away at a rate of £1 for every £2 of income above that threshold. The effective marginal tax rate in this band is 60%, and Section 24 can push landlords into it who would not otherwise be there. A landlord with a salary of £85,000 and rental income of £20,000 (with £14,000 of mortgage interest) might previously have had an adjusted net income of £91,000. Under Section 24, their adjusted net income is £105,000, and they begin to lose their personal allowance, creating an additional tax cost that has nothing to do with their actual rental profit. The same issue arises in relation to the High Income Child Benefit Charge, which applies where adjusted net income exceeds £60,000. Pension annual allowance tapering, student loan repayments, and entitlement to certain tax credits can all be similarly affected. These secondary costs are often overlooked but can be just as significant as the direct Section 24 impact. Who Can Still Deduct Mortgage Interest in Full? The Section 24 restriction applies to individual landlords and to partnerships where the partners are individuals. It does not apply to companies. A limited company that owns residential rental property can still deduct mortgage interest as a business expense in the normal way, paying corporation tax only on its net profit after finance costs have been deducted. This is the fundamental reason why incorporation has become such a widely discussed strategy for landlords since the rules changed. The restriction is also specific to residential property. Landlords who let commercial premises — offices, retail units, industrial property — are unaffected and can continue to deduct finance costs in full. And while the furnished holiday lettings regime previously offered an exemption from Section 24 for qualifying short-term lets, that regime was abolished with effect from April 2025. Any landlord who previously relied on that exemption now falls within the standard residential property rules. What About Other Finance Costs? It is worth being clear that Section 24 applies not just to mortgage interest but to all finance costs relating to the property rental business. This includes interest on loans taken out to fund property improvements or repairs, loan arrangement fees, and other costs incurred in connection with obtaining or repaying finance. The same 20% tax reduction applies to all of these costs, and the same rules about the purpose of the borrowing apply. Can You Carry Forward Unused Relief? Where the 20% tax reduction cannot be fully utilised in a given year, because the property profits or adjusted total income are insufficient to absorb it, the unused finance costs are not lost. They can be carried forward to future tax years and used when sufficient income is available. This carry-forward is particularly relevant for landlords who made losses in earlier years or whose income fluctuated significantly. However, it must be actively tracked and claimed in the self-assessment return; HMRC will not apply it automatically. Is Incorporation the Answer? For landlords with larger portfolios or higher marginal tax rates, transferring properties into a limited company is often the most tax-efficient long-term response to Section 24. A company pays corporation tax — currently 19% for profits up to £50,000, rising to 25% for profits above £250,000 — and can deduct mortgage interest in full before calculating its taxable profit. For a highly leveraged portfolio, the difference in tax between personal and corporate ownership can be very substantial. But the process of incorporation has its drawbacks and pitfalls. Conveying property from individuals to the company will result in a capital gains tax event and may result in a large capital gains tax liability if there has been a substantial increase in value of the properties since the acquisition. Stamp duty land tax may also apply on transfer, based on the market values of the properties. The one-off costs of the incorporation need to be calculated against the ongoing tax savings. For some landlords, the numbers stack up clearly in favour of incorporation. For others — particularly those with low mortgage balances, properties standing at large gains, or plans to sell in the near future — the costs may outweigh the benefits. There is no universal answer. What Should You Do? If you have not reviewed your tax position since Section 24 came fully into force in April 2020, the starting point is to understand exactly how the restriction is affecting your current tax bill. That means calculating your rental income and allowable expenses, identifying your total finance costs, and working out the tax reduction you are entitled to, including any carry-forward from previous years. If your portfolio has grown, your income has changed, or you have remortgaged in recent years, it is also worth reviewing whether your current ownership structure remains the most tax-efficient one — not just in terms of Section 24, but taking into account capital gains tax, inheritance tax, and your longer-term succession planning. Summary Mortgage interest is no longer tax deductible for individual landlords letting residential property in the UK. Since April 2020, the old deduction has been replaced by a basic rate tax reduction worth 20% of qualifying finance costs, a change that has significantly increased the tax burden on higher and additional rate taxpayers. The impact extends beyond the direct tax calculation, affecting adjusted net income and a range of income-related thresholds and allowances. The restriction does not apply to companies, which can still deduct mortgage interest in full, making incorporation an attractive option for many portfolio landlords — though the one-off costs of transferring properties into a company must be weighed carefully against the ongoing tax savings. This article is for general information purposes. UK Landlord Tax provides specialist tax advice for landlords across the UK. For tailored advice on your specific circumstances, get in touch with our team.

¿Los intereses hipotecarios siguen siendo deducibles de impuestos para los propietarios que alquilan viviendas?

Las reglas antiguas: Cuando los intereses hipotecarios eran totalmente deducibles

Lo que dicen las reglas ahora

Un ejemplo práctico

Efectos colaterales que quizás no hayas considerado

¿Quiénes pueden seguir deduciendo la totalidad de los intereses de su hipoteca?

¿Qué ocurre con otros gastos financieros?

¿La constitución de una sociedad es la solución?

¿Qué deberías hacer?

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