Mortgage Interest Relief
The historical ability for landlords to deduct mortgage interest from rental income as a tax expense, now replaced by a 20% tax credit under Section 24.
Mortgage interest relief was the term used to describe the ability of individual landlords to treat mortgage interest as a deductible expense against rental income, reducing their taxable profit pound for pound.
How It Used to Work
Before 2017, a landlord earning £20,000 in rent and paying £12,000 in mortgage interest would only be taxed on the £8,000 profit. The full interest cost was deductible, regardless of tax band.
What Changed
Section 24 of the Finance Act 2015 began phasing out mortgage interest relief from April 2017, completing by April 2020. It was replaced with a 20% tax credit — a flat-rate relief regardless of your personal tax band.
The Phase-Out Timeline
| Tax year | % deductible | % as 20% credit |
|---|---|---|
| 2017/18 | 75% | 25% |
| 2018/19 | 50% | 50% |
| 2019/20 | 25% | 75% |
| 2020/21+ | 0% | 100% |
Who Is Still Unaffected?
- Limited companies — mortgage interest remains fully deductible as a business expense
- Furnished Holiday Lets (FHLs) — historically maintained full relief, though this relief ended in April 2025
- Commercial property — full deduction remains available
This is one of the primary reasons many landlords have incorporated their property portfolios into SPV limited companies since 2017.