Last reviewed: June 2026
TL;DR- Owner-occupiers: no deduction for mortgage interest on a main home - mortgage interest is a personal expenditure, not a tax-deductible expense.
- Individual landlords: cannot deduct mortgage interest from rental income - receive a 20% basic rate tax credit instead (Section 24).
- Limited company landlords: can deduct mortgage interest as a business expense before corporation tax - this remains fully available.
- HMRC's Property Income Manual is the authoritative source for the rules on rental income, allowable expenses and finance costs.
The Position for Owner-Occupiers
In the UK there is no income tax deduction for mortgage interest on a residential property used as the owner's main home. Mortgage interest is treated as a personal expenditure - the equivalent of a household bill - and does not reduce taxable income. This has been the position since Mortgage Interest Relief at Source (MIRAS) was abolished in April 2000. No new equivalent relief has been introduced.
The main tax benefit for owner-occupiers remains the capital gains tax exemption on the eventual sale of the main home under Private Residence Relief, not relief on mortgage payments during ownership.
The Position for Individual Landlords
Since April 2020, individual landlords holding residential rental properties cannot deduct mortgage interest from rental income as a business expense. Section 24 of the Finance Act 2015 replaced the full deduction with a 20% basic rate tax credit on finance costs. The credit reduces the income tax liability but does not reduce the taxable rental income figure. The practical effect is that higher and additional rate taxpayer landlords pay significantly more tax on the same rental income than they did before the restriction.
Allowable expenses that remain fully deductible for individual landlords include: letting agent fees; property maintenance and repair costs; insurance; professional fees; and other running costs. Only finance costs (mortgage interest and associated finance charges) are subject to the Section 24 restriction.
The Position for Limited Company Landlords
Limited companies holding residential rental properties can deduct mortgage interest as a business expense in the normal way before calculating corporation tax. This is because Section 24 applies only to individuals - companies are assessed under corporation tax rules, not income tax. A company deducts all allowable business expenses (including mortgage interest) from income before applying the corporation tax rate. This is why many landlords have moved or are considering moving new purchases into limited company structures.
Other Finance Cost Deductions for Landlords
Beyond mortgage interest, other finance costs for rental properties may be treated differently. The Section 24 restriction applies to "finance costs" broadly - this includes not only mortgage interest but also interest on loans taken out to fund furnishings or repairs, mortgage arrangement fees spread over the term, and other financing charges. HMRC's Property Income Manual (PIM) provides detailed guidance on what falls within the finance cost restriction.
Frequently Asked Questions
Can I deduct the arrangement fee on a buy-to-let mortgage?
Mortgage arrangement fees on buy-to-let mortgages are finance costs and are subject to the Section 24 restriction for individual landlords - they are not deductible as a separate expense but qualify for the 20% tax credit in the same way as mortgage interest. For limited company landlords, arrangement fees are deductible as business expenses. HMRC's Property Income Manual contains detailed guidance on the treatment of specific costs.
Can I deduct mortgage interest if I work from home in the property I own?
A proportion of household costs (including mortgage interest) may be deductible if a room is used exclusively for business purposes as a home office. HMRC's rules on home office expenses are specific - the room must be used exclusively and regularly for business and not for personal purposes. The deductible proportion is calculated based on the proportion of the property used for business. The rules are complex and specialist tax advice is recommended for anyone claiming home office expenses against a mortgage.
Is mortgage interest deductible for furnished holiday lets?
The Furnished Holiday Lettings regime, which previously allowed full mortgage interest deductibility, was abolished from 6 April 2025. From that date, FHL income is treated as ordinary property income subject to Section 24. Mortgage interest on former FHL properties is now subject to the same 20% basic rate credit restriction as other residential lettings for individual landlords. Specialist tax advice is required for landlords affected by this change.
Where can I find the authoritative HMRC guidance on rental income tax?
HMRC's Property Income Manual (PIM) is the authoritative reference for the tax treatment of rental income, allowable expenses and finance costs. It is published on GOV.UK and is regularly updated. For specific queries about individual circumstances, HMRC's Self-Assessment helpline and a specialist property tax accountant are the appropriate sources of advice.
