If the mortgage is on your own home, you normally cannot claim tax relief on the interest. Mortgage Interest Relief at Source (MIRAS) was withdrawn from 6 April 2000.
If you are an individual residential landlord, you also cannot deduct mortgage interest directly from rental profit.
Instead, qualifying residential finance costs can produce a basic-rate Income Tax reduction, currently 20% for 2026/27. Companies and non-residential property businesses follow different rules.
Can Homeowners Claim Tax Relief On Mortgage Interest?
For most homeowners, the answer is no. Interest on a mortgage used to buy or maintain a privately occupied main residence is a personal cost rather than an expense of earning taxable property income.
The old MIRAS system was withdrawn from 6 April 2000, so buying a first home, switching mortgage type or remortgaging your own residence does not normally create an Income Tax deduction.
Support for Mortgage Interest is separate. It is a repayable government loan available to some people receiving qualifying benefits and is not a tax deduction.
Can Landlords Claim Tax Relief On Mortgage Interest?
Individual landlords can receive relief on qualifying finance costs connected with residential property businesses, but the system changed substantially under the rules commonly known as Section 24.
The restriction followed changes introduced in 2015 and was phased in from 2017/18 before becoming fully effective from 2020/21.
Individual residential landlords now generally calculate rental profit without deducting mortgage interest and then claim a separate basic-rate tax reduction.
| Tax Year | Interest Deductible From Rental Profit | Finance Costs Receiving Basic-Rate Reduction |
| 2017/18 | 75% | 25% |
| 2018/19 | 50% | 50% |
| 2019/20 | 25% | 75% |
| 2020/21 onwards | 0% | 100% |
For 2026/27, the reduction is generally 20% of the lowest of the qualifying finance costs for the year plus eligible amounts brought forward, the property-business profit after relevant losses, or adjusted total income above the Personal Allowance after the required exclusions.
The reduction cannot create an Income Tax refund. If the full amount cannot be used because property profit or adjusted income is too low, eligible unused finance costs can normally be carried forward against the same property business.
How Does The 20% Mortgage Interest Tax Reduction Work?
Assume a landlord receives £30,000 in annual rent, has £8,000 of ordinary allowable expenses and pays £10,000 in qualifying mortgage interest.
| Calculation | Amount |
| Rental income | £30,000 |
| Allowable non-finance expenses | £8,000 |
| Taxable property profit before finance-cost reduction | £22,000 |
| Qualifying mortgage interest | £10,000 |
| Maximum 20% finance-cost reduction, if not otherwise limited | £2,000 |
The important point is that the taxable rental profit is £22,000, not £12,000. The £10,000 interest is considered later when calculating the tax reduction.
That difference matters most for higher-rate taxpayers because the larger property profit can push more income into higher tax bands before the tax reducer is applied.
Can Section 24 Affect Your Personal Allowance?
Yes. This is one of the most important consequences for landlords with higher total income.
For 2026/27, the standard Personal Allowance is £12,570. It is reduced by £1 for every £2 of adjusted net income above £100,000 and disappears completely at £125,140.
Because restricted residential mortgage interest is not deducted when rental profit is calculated, a landlord’s adjusted net income may be higher than expected.
For example, someone with £90,000 of other taxable income and £22,000 of taxable property profit could have adjusted net income around £112,000 before considering pension contributions, Gift Aid or other adjustments. That would reduce the Personal Allowance by £6,000.
For taxpayers subject to the main 40% higher rate, the interaction between higher-rate tax and withdrawal of the Personal Allowance can create an effective 60% marginal Income Tax rate within part of the £100,000 to £125,140 range.
Scottish rates differ, so Scottish landlords need to calculate the effect using the rates applying to them.
Which Mortgage Interest And Finance Costs Can Qualify?
Qualifying costs can include interest on a buy-to-let mortgage, interest on another loan used wholly for the property business, relevant overdraft interest and certain incidental costs of arranging finance, such as qualifying loan fees and commissions.
Capital repayments do not qualify because they repay the amount borrowed rather than represent a cost of finance.
The purpose of the borrowing is critical. A mortgage secured on a rental property is not automatically fully eligible if part of the money is used privately.
Likewise, a personal loan can potentially qualify if the funds are clearly and wholly used for the property business.
Good records should show the loan agreement, annual interest charged, completion statements and the movement of remortgage or loan proceeds.
What Happens When A Landlord Remortgages Or Releases Equity?
Remortgaging is an area where the use of the money and the accounting basis both matter.
HMRC’s general rule is that interest must relate to borrowing used for the property business. If a landlord increases a mortgage and uses the extra money to buy a private asset, interest attributable to that private borrowing is not normally allowable.
There is also a specific loan-cost restriction under the cash basis, which is the default basis for many individual property businesses.
Where relevant property-business borrowing exceeds the value of properties involved in the business, the eligible finance cost can be restricted.
The property value for this test generally starts with market value when the property first entered the property business, plus qualifying capital expenditure not already deducted.
For example, if relevant property-business borrowing is £250,000 but the applicable property-business value for the statutory test is £200,000, the eligible loan cost may be limited using a £200,000/£250,000 ratio before the residential finance-cost restriction is applied.
This is more precise than assuming every pound raised against a rental property qualifies simply because the property is security for the loan.
What Changed For Furnished Holiday Lets In 2025?
The special furnished holiday lettings regime ended from 6 April 2025 for Income Tax and Capital Gains Tax and from 1 April 2025 for Corporation Tax.
Before abolition, qualifying furnished holiday lets had more favourable finance-cost treatment.
Individual owners are now broadly treated like other residential landlords for finance and mortgage interest, meaning relief is generally given through the basic-rate tax reduction rather than a full deduction.
Companies are not subject to the individual residential finance-cost restriction in the same way.
Is A Limited Company Treated Differently?
Yes. A company carrying on a property business is generally dealt with under Corporation Tax and loan-relationship rules rather than the individual Section 24 restriction.
Qualifying interest can therefore normally be recognised in the company tax calculation.That does not mean company ownership is automatically better.
Anyone considering buying property through a limited company should also consider mortgage pricing, accounting costs, extraction of profits, higher property-purchase taxes where applicable and the tax consequences of transferring an existing personally owned property.
| Issue | Individual Residential Landlord | Limited Company |
| Mortgage interest | Basic-rate tax reduction | Generally dealt with under loan-relationship rules |
| Tax on rental profit | Income Tax | Corporation Tax |
| Profit extraction | Already personal income | Further tax can arise when profits are extracted |
| Transferring existing property | Not applicable | May trigger tax and transaction costs |
| Administration | Usually simpler | Company accounts and filing duties apply |
The current Corporation Tax rules should therefore be considered alongside mortgage-interest treatment rather than looking at the interest deduction in isolation.
How Do The Rules Differ In Scotland And Wales?
For 2026/27, Scottish Income Tax bands differ from those applying in England, Wales and Northern Ireland, so the tax charged on taxable property profit can differ for a Scottish taxpayer.
Wales currently uses the same effective main rates of 20%, 40% and 45% for 2026/27.
From 6 April 2027, Finance Act 2026 introduces separate property-income rates of 22%, 42% and 47% for England, Wales and Northern Ireland.
The residential finance-cost tax reduction will use the 22% property basic rate. Scottish property-income treatment should be checked separately for the relevant year.
What Changes From 6 April 2027?
The 2027/28 tax year brings a major change for property income in England, Wales and Northern Ireland.
| Rule | 2026/27 | From 6 April 2027 |
| Basic property-income rate | 20% main rate | 22% property basic rate |
| Higher property-income rate | 40% main rate | 42% property higher rate |
| Additional property-income rate | 45% main rate | 47% property additional rate |
| Residential finance-cost relief rate | 20% | 22% |
If a landlord has £10,000 of qualifying residential finance costs and none of HMRC’s limiting rules restricts the claim, the maximum reduction would rise from £2,000 at 20% to £2,200 at 22%.
The ordering rules for allowances and reliefs also change from 2027/28, so landlords should not simply increase both their tax rate and finance-cost credit in an old spreadsheet and assume the result is correct.
How Do You Report Mortgage Interest On Self Assessment?
For the 2025/26 SA105 UK property pages published in 2026, residential finance costs are entered separately from ordinary property expenses.
Step 1: Calculate total rental income and other UK property receipts.
Step 2: Deduct allowable non-finance expenses, such as qualifying repairs, insurance, management fees and professional costs.
Step 3: Work out current residential mortgage interest and other qualifying finance costs. These go in Box 44 rather than the ordinary expense boxes.
Step 4: Enter unused residential property finance costs brought forward from earlier years in Box 45.
Step 5: Keep your own record of any current-year finance costs that remain unrelieved so they can be brought forward correctly in a later year.
Landlords within Making Tax Digital for Income Tax use compatible software and quarterly digital updates instead of relying only on the traditional annual SA105 process.
From 6 April 2026, MTD applies to relevant sole traders and landlords with qualifying self-employment and property income above £50,000, based on the applicable prior-year test.
The threshold falls to more than £30,000 from April 2027 and more than £20,000 from April 2028.
Conclusion
So, can you claim tax relief on mortgage interest? A homeowner normally cannot claim relief for mortgage interest on a private residence.
An individual residential landlord can usually receive relief, but not as a full deduction from rental income. For 2026/27, qualifying finance costs generally produce a 20% tax reduction subject to HMRC’s limits.
The calculation becomes more complicated where income approaches £100,000, borrowing is increased through remortgaging, a property has mixed private and business use, or ownership is through a company.
Former furnished holiday lets are now within the wider post-2025 property rules, while another important change arrives on 6 April 2027 when separate property-income rates and a 22% finance-cost reduction apply in England, Wales and Northern Ireland.
FAQs
Is Mortgage Interest 100% Tax Deductible For A Landlord?
Not for an individual residential landlord. Since 2020/21, qualifying interest is generally relieved through a basic-rate tax reduction rather than deducted in full from rental income.
What If My Mortgage Interest Is Higher Than My Rental Profit?
The tax reduction can be limited by property-business profit and adjusted total income. Eligible unused finance costs can normally be carried forward for the same property business.
Can A Limited Company Claim Full Mortgage Interest Relief?
Companies are not subject to the individual Section 24 restriction in the same way. Qualifying interest is generally dealt with under Corporation Tax loan-relationship rules.
Can I Claim Mortgage Interest On A Second Home?
Not simply because it is a second home. If it is privately occupied, the interest is normally personal. If it is genuinely part of a property business, qualifying business-use interest may receive relief.
Can I Claim Interest On A Personal Loan Used For A Rental Property?
Potentially. The key issue is how the money was used, not the product label. Clear evidence must connect the borrowing to the property business.
Can Mortgage Interest Relief Create A Tax Refund?
No. The residential finance-cost tax reduction cannot be used to create an Income Tax refund, although unused eligible finance costs may sometimes be carried forward.
Do Former Furnished Holiday Lets Still Get Full Mortgage Interest Deductions?
Not for individual owners under the post-April 2025 rules. The former FHL tax regime was abolished, so finance costs are now broadly treated in the same way as other residential property finance costs.
