What is UK Section 24 (the finance cost credit)?

What changed in 2020

Before the 2017–2020 phase-in, UK landlords deducted mortgage interest from rental income like any other expense — the same way Australian negative gearing still works. Since the 2020-21 tax year, Section 24 of the Finance (No. 2) Act 2015 changed that: rental profit is now calculated without deducting finance costs at all. Tax is charged on that higher profit figure. Then, separately, a 20% tax-reducer credit is applied against the tax bill — not against the profit itself.

Why this matters more than it sounds

For a basic-rate (20%) taxpayer, a 20% credit on finance costs works out roughly the same as the old full deduction. For a higher-rate (40%) or additional-rate (45%) taxpayer, it doesn’t — you’re taxed on the full pre-finance-cost profit at your higher rate, but only get relief at the flat 20% rate. This is the main reason Section 24 pushed some UK landlords into losses, or into incorporating their portfolios into a limited company (which isn’t subject to Section 24 at all).

The credit is capped

The 20% credit is capped at the lowest of:

1. Finance costs for the year (plus any unused amount carried forward from prior years)
2. The property business’s profit for the year — the credit can’t create or enlarge a loss
3. Your adjusted total income above the personal allowance

Property Insights models caps 1 and 2. Cap 3 depends on your total income across every source (salary, other properties, savings, dividends) — not something a per-property tool can compute exactly — so it isn’t modeled; the figures shown are a close approximation for most landlords, not an exact substitute for cap 3 in every case.

Unused finance costs, where the cap bites, carry forward to future tax years against the same property business.

Where you’ll see it

Property → Cashflow/Forecast tabs (After-Tax Cashflow) and the Tax tab’s carry-forward tracking, for any property set to the United Kingdom.

This is general information, not tax advice — confirm your situation with HMRC or a qualified accountant.