Mortgage Interest Relief Rising to 22% from April 2027
Last updated 28 June 2026 · 8 min read · By the LandlordTaxAi Editorial Team
The short answer
From 6 April 2027, the Section 24 mortgage-interest tax credit rises from 20% to 22% — the new property basic rate. It is still a basic-rate credit, not a full deduction. But this small improvement comes alongside a 2-point rise in property tax rates, so most landlords still pay more tax overall.
Section 24 has reshaped landlord tax since 2017: individual landlords can no longer deduct mortgage interest from their rental profit and instead receive a basic-rate tax credit. The Autumn Budget 2025 nudged that credit up to 22% from 2027 — a rare piece of good news, but one that needs context.
This guide explains the change, shows it with a worked example, and sets it against the wider rate rise. For a refresher on the mechanism, see Section 24 mortgage interest explained.
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Section 24 impact calculator
See how the mortgage interest credit affects your tax. The credit is 20% now and rises to 22% from April 2027.
Result
- Tax the old way (interest deducted)
- £2,400
- Tax under Section 24 (20% credit)
- £3,600
- Extra tax Section 24 costs you
- £1,200
Calculator uses the current 20% credit. From April 2027 use 22%. Estimate only — not tax advice.
What is actually changing
Under Section 24, your finance costs (mainly mortgage interest) are not deducted from profit. Instead, HMRC works out your tax on the full profit, then gives a tax reducer equal to a basic-rate percentage of your finance costs.
- Now (to 2026/27): credit = 20% of finance costs.
- From April 2027: credit = 22% of finance costs (the new property basic rate).
The credit is still limited to the lower of your finance costs, your property profit, and your income above the personal allowance — with any excess carried forward.
A worked example
Sam is a higher-rate landlord with £18,000 rental profit (before interest) and £6,000 of mortgage interest.
| 2026/27 | 2027/28 | |
|---|---|---|
| Tax on profit | £18,000 × 40% = £7,200 | £18,000 × 42% = £7,560 |
| Less interest credit | £6,000 × 20% = £1,200 | £6,000 × 22% = £1,320 |
| Tax due | £6,000 | £6,240 |
The bigger 22% credit saves Sam £120, but the higher 42% rate on profit adds £360 — a net £240 more tax. The relief rise softens the blow; it does not cancel it.
Companies still deduct in full
Section 24 only applies to individuals. A limited company deducts mortgage interest in full as a business expense against Corporation Tax, which is why some portfolio landlords consider incorporating — though SDLT, CGT and running costs must be weighed first. See limited company vs personal buy-to-let.
Remember: arrangement and broker fees count as finance costs too, so they also qualify for the (rising) basic-rate credit — don’t forget to include them.
Get your finance-cost credit right
LandlordTaxAi spots mortgage interest and finance costs in your bank statements and applies the Section 24 rules automatically — so your credit is never missed.
See how it worksFrequently asked questions
Is mortgage interest relief going up?
Yes — from April 2027 the Section 24 credit rises from 20% to 22%. It remains a basic-rate reduction, not a full deduction.
Does that mean landlords pay less tax?
On the interest relief alone, slightly less. But property tax rates also rise 2 points to 22% / 42% / 47%, so most landlords pay more overall.
How does Section 24 work?
Individuals cannot deduct mortgage interest from profit. They get a tax credit worth a basic-rate percentage of finance costs — 20% now, 22% from April 2027.
Which costs count as finance costs?
Mortgage interest, interest on loans to buy or improve the property, and incidental loan costs like arrangement and broker fees. Capital repayment never qualifies.
Do limited companies get the 22% credit?
No. Section 24 only applies to individuals. Companies deduct interest in full against Corporation Tax.
When does the 22% rate apply?
From the 2027/28 tax year (6 April 2027). For 2026/27 the credit is still 20%.
Written and reviewed by the LandlordTaxAi Editorial Team. Our guides are reviewed against current HMRC guidance and updated when the rules change. Operated by LandlordTaxAi, United Kingdom. Follow us on LinkedIn.
Last reviewed: 28 June 2026 · Researched against primary UK sources: https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income/change-to-tax-rates-for-property-savings-and-dividend-income-technical-note ; https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies . This article is informational only and does not constitute tax advice. Check the latest details on GOV.UK or with a qualified accountant.