Mortgage Interest and Section 24: How Kent Landlords Are Really Taxed on Rent

If you own a buy-to-let with a mortgage and you have ever looked at your tax bill and thought “that can’t be right, I barely made anything”, you are not imagining it. A rule known as Section 24 changed the way individual landlords are taxed on mortgage interest, and it hits higher-rate taxpayers hardest. It is probably the single most misunderstood part of landlord tax, so here is what it actually means for landlords across Gravesend, Dartford, Medway and the rest of Kent.

How it used to work

Until a few years ago, mortgage interest was simply a business expense. You took your rent, deducted your mortgage interest along with your other costs, and paid tax on what was left. A landlord paying £8,000 of interest knocked the full £8,000 off their taxable profit. Simple, and the same treatment any other business would expect.

What Section 24 changed

Section 24 removed that deduction for individual residential landlords. Fully in force since the 2020/21 tax year, it means you can no longer take mortgage interest — or the interest on other buy-to-let borrowing — off your rental income as an expense. Instead, you declare the full rent as profit, work out the tax on that larger figure, and then receive a basic-rate tax reduction worth 20% of your finance costs. For a basic-rate taxpayer, the maths roughly works out the same as before. For a higher or additional-rate taxpayer, it does not — and that is the sting.

Why higher-rate landlords pay more

The problem is the mismatch. Your rental profit is taxed at your top rate — 40% or 45% — but you only get relief on the interest at 20%. Picture a landlord with £15,000 of rent and £8,000 of mortgage interest. Under the old rules they would be taxed on £7,000. Under Section 24 they are taxed on the full £15,000, then given a £1,600 credit (20% of £8,000) to set against the bill. A higher-rate taxpayer ends up paying noticeably more tax on the same real income. In the harshest cases, the extra taxable profit can even push a landlord into the higher-rate band, or reduce their entitlement to allowances, making the effect worse still.

The company exception

There is one important carve-out. Section 24 applies to individuals, not companies. A landlord who holds property through a limited company still deducts mortgage interest in full as a business cost and pays Corporation Tax on the profit after interest. That is a big reason so many landlords have looked at incorporating in recent years. It is not a free win, though — moving property into a company can trigger Stamp Duty and Capital Gains Tax, brings mortgage and running costs of its own, and only suits some situations. It is a decision to model carefully, not a reflex.

A further change is coming in 2027

It is worth having this on your radar. At the Autumn Budget in November 2025, the government announced that from April 2027 income tax rates on property income will each rise by two percentage points, to 22%, 42% and 47%. Alongside that, the Section 24 credit is set to rise from 20% to 22%, in line with the new basic rate. The headline is that most individual landlords will pay a little more tax on their rental profits from 2027, and once again, company landlords are not affected in the same way. Nothing changes today, but it is a good reason to review your position before then.

What Kent landlords can do

There is no magic wand, but there are sensible moves. Make sure you are claiming every other allowable expense, so your profit figure is as accurate as it can be. Check whether splitting ownership with a spouse in a lower tax band would help. If you are weighing up a limited company, get the numbers modelled properly rather than acting on what worked for someone else. And keep an eye on the 2027 change so it does not catch you cold.

How MCC Partners can help

Section 24 is exactly the sort of rule where a clear explanation and a look at your own figures is worth far more than general advice online. For landlords across Gravesend and the wider Kent area, we calculate the real effect on your tax, check whether ownership structure or incorporation would genuinely help, and keep you ahead of the 2027 changes. We will always show you the actual numbers for your situation before you decide anything.