Property 8 min read • March 2026

Buy-to-let after Section 24 — the real numbers at each tax band

The 2017 introduction of Section 24 fundamentally changed the economics of leveraged buy-to-let for higher-rate taxpayers. Many articles about BTL profitability still use pre-2017 logic. This guide does the actual post-Section 24 maths.

What Section 24 actually changed

Before 2017, landlords could deduct mortgage interest as a business expense, paying tax only on net profit (rent minus mortgage interest minus other costs). A higher-rate taxpayer with rent of £12,000 and mortgage interest of £8,000 paid 40% tax on £4,000 profit — £1,600.

Since 2020 (full phase-in), the deduction is gone. Tax is paid on gross rental income minus allowable costs (but NOT mortgage interest). A basic rate tax credit is then applied equivalent to 20% of mortgage interest. The maths for higher-rate taxpayers is materially different.

The same example post-Section 24

Rent: £12,000. Mortgage interest: £8,000. Other allowable costs: £1,500. Taxable income: £12,000 − £1,500 = £10,500. Tax at 40%: £4,200. Less basic rate credit: £8,000 × 20% = £1,600. Net tax: £2,600. Compare to the pre-S24 tax of £1,600 — that's 63% more tax on the same property with the same rent and mortgage.

📊 The higher-rate trap

For a higher-rate taxpayer with a high loan-to-value mortgage, Section 24 can push tax higher than actual cash profit — meaning the landlord pays tax on a 'profit' they never received in cash. This is the scenario that has made many BTL investments loss-making.

Who is affected most

Higher and additional rate taxpayers with leveraged properties (large mortgages relative to property value) are worst affected. Basic rate taxpayers are less affected — they pay 20% tax and receive a 20% credit, so the credit largely neutralises the charge. Limited company structures avoid Section 24 (companies can still deduct mortgage interest) but introduce corporation tax, dividend tax, and additional complexity.

Stress-testing your own numbers

The applies correct post-Section 24 treatment at your tax band, showing net yield after mortgage, maintenance, voids and tax — and compares it to investing the deposit instead.

What the data shows

Independent analysis consistently shows that leveraged BTL at higher-rate tax bands in high-price, low-yield areas (London, South East) produces net yields below what a diversified index fund would return on the same capital — without the concentration risk, illiquidity, and management overhead of direct property ownership. In lower-price, higher-yield areas the case is stronger — but Section 24 still materially reduces returns compared to pre-2017 projections.