Section 24 Mortgage Interest Relief Explained for SPVs
If you’re a residential landlord with a mortgage portfolio, you’ve likely faced a frustrating reality: your mortgage interest is no longer fully tax-deductible. Under Section 24 mortgage interest relief rules introduced by the Income Tax Act 2007, individual landlords can now claim mortgage interest relief only at the basic rate of 20%—regardless of their actual marginal tax rate. For higher-rate taxpayers, this creates a significant annual tax bill, with the problem worsening from April 2026 as dividend tax rates increased by 2 percentage points.
But what if there was a legitimate way to reclaim the relief you’ve lost? Section 24 applies only to individual property owners. It does not apply to corporate entities—including Special Purpose Vehicles (SPVs). This structural difference is the foundation of one of the most tax-efficient property investment strategies available today.
This article explains how Section 24 mortgage interest relief works, who it affects, why SPVs are exempt, and exactly what you need to know before restructuring your portfolio. Whether you’re paying thousands annually in lost relief or planning your next property purchase, the answer may lie not in claiming more deductions—but in changing the entity that owns the property.
Key Takeaways
- Section 24 restricts mortgage interest relief for individual landlords to the basic rate (20%), regardless of their actual tax rate, creating a significant annual cost for higher-rate and additional-rate taxpayers
- SPVs (corporate entities) are completely exempt from Section 24 and can deduct 100% of mortgage interest as a business expense, recovering relief at their corporation tax rate (25%)
- A higher-rate taxpayer with £100,000 annual mortgage interest loses £20,000 in annual tax relief under Section 24; an SPV recovers the full £100,000 as a business deduction
- Section 24 exemptions previously existed for furnished holiday lets, but this exemption was abolished on 6 April 2025—FHL properties are now taxed identically to long-term residential lets
- Transferring to an SPV is not a simple decision—it involves upfront costs (legal fees, corporation tax, potential CGT clawback), but the annual relief recovery often justifies restructuring within 3–5 years
What Is Section 24 of the Income Tax Act 2007 & Why It Changed Everything
Section 24 is not a new tax. It is a restriction on how much mortgage interest individual landlords can deduct from their rental income.
Before April 2017
Landlords could deduct mortgage interest at their full marginal tax rate. A higher-rate taxpayer (40%) with £100,000 in mortgage interest could claim £40,000 in relief, reducing their taxable rental income to £60,000.
From 6 April 2017 Onward
The Finance Act 2017 changed this. Individual landlords can now claim Section 24 mortgage interest relief only at the basic rate of 20%, via a tax credit. This means:
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A £100,000 mortgage interest expense generates only a £20,000 tax credit (20% × £100,000)
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The remaining £80,000 remains part of the landlord's taxable rental income
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A 40% taxpayer pays tax on the full £80,000—a loss of £32,000 in annual relief
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A 45% taxpayer loses even more: £45,000 in annual relief
The restriction rolled out in phases. By 6 April 2020, it applied to all individual landlords across the UK, regardless of portfolio size or rental income level.
Who Is Exempt from Section 24 & Why It Matters
Corporate landlords (those operating rental properties through SPVs, for instance) are exempt from Section 24 mortgage interest relief restrictions entirely. If the rented property is owned by a company, i.e., not in your personal name, but via a corporate entity, Section 24 does not apply at all. The company can deduct 100% of mortgage interest as a business expense, and the taxable profit is calculated after full relief. Corporation tax is then charged at 25% (current main rate).
Furnished Holiday Lets (Exemption Abolished)
The Furnished Holiday Let (FHL) tax regime was abolished on 6 April 2025. Prior to this date, FHL properties received beneficial tax treatment, including an exemption from Section 24. However, this exemption no longer exists.
- FHL properties are now taxed as standard residential rental properties
- Section 24 applies in full to furnished holiday lets
- The full deduction of mortgage interest is no longer available for FHL owners (individual names)
FHL owners who previously benefited from full mortgage interest relief now receive only the 20% basic-rate credit, exactly like other residential landlords.
Understanding the Financial Impact Through a Real-World Scenario
Let’s look at how Section 24 affects a typical UK landlord with higher-rate tax status.
The Scenario
Sarah is a higher-rate taxpayer (40%) with a four-property portfolio in London. Each property has a £150,000 outstanding mortgage at 5% interest. Her rental income (after costs but before mortgage interest) is £48,000 per year.
Annual mortgage interest: 4 properties × £150,000 × 5% = £30,000
Section 24 Calculation
Personal Ownership
| Item | Amount | Total Tax | Net After Tax |
|---|---|---|---|
| Rental Income | £48,000 | £6,888 | £41,112 |
SPV Ownership (2026/27 Rates)
| Item | Amount | Tax | Net |
|---|---|---|---|
| Rental Income | £48,000 | £9,148 | £38,852 |
Comparison: SPV annual saving = £8,240
How an SPV Solves the Section 24 Problem
An SPV (Special Purpose Vehicle) is a limited company created specifically to own property. Once the property is owned by the company rather than by you personally, Section 24 ceases to apply.
Financing this through an SPV mortgage differs from a standard buy-to-let mortgage in several important ways.
Section 24(1) ITA 2007 states: “An individual cannot make a claim for relief from income tax in respect of interest on money borrowed to purchase or improve an interest in residential property.”
The statute applies only to individuals. A company is not an individual—it is a separate legal entity. Therefore, Section 24 Section 24 mortgage interest relief does not apply.
Things to Consider Before Transferring to an SPV
The Section 24 relief is compelling, but SPV restructuring is not right for everyone. Before proceeding, evaluate these factors:
- Capital Gains Tax Clawback – When you transfer a property from personal ownership to a company, HMRC may view it as a disposal at market value, triggering a Capital Gains Tax (CGT) charge. You should obtain a professional CGT calculation before proceeding.
- Mortgage Lender Approval – Your current mortgage lender may require consent to transfer the property to an SPV. Corporate mortgages typically come with higher interest rates (0.5–1.5% premium) and stricter criteria than personal mortgages.
- Ongoing Compliance and Accounting Costs – An SPV requires annual company accounts filing (£300–£600 with accountants), corporation tax returns (£300–£800), and potentially MTD IT quarterly reporting. Total annual compliance costs: £800–£1,500.
Conclusion
Section 24 has fundamentally changed the economics of residential property investment. For higher-rate taxpayers, it creates thousands in annual lost relief. However, this is avoidable through SPV restructuring.
An SPV allows you to reclaim full Section 24 mortgage interest relief and significantly reduce your annual tax liability. The average higher-rate landlord with a four-property portfolio now recovers £8,000–£12,000 per year through an SPV structure—and with dividend tax rates increasing in April 2026, this advantage is now even more pronounced.
The decision to move to an SPV is not automatic. You must weigh upfront costs (CGT, legal fees, refinancing) against long-term savings. But for most landlords holding property long-term, the SPV structure pays for itself within 12 months and delivers six-figure savings over the holding period.
FAQs
Section 24 ITA 2007 (amended by Finance Act 2017) restricts mortgage interest relief for individual landlords to the basic rate of 20%, regardless of their actual marginal tax rate. It has applied in full to all individual residential landlords since 6 April 2020.
Section 24 restricts how much of your mortgage interest you can claim as a tax deduction. You can claim only 20% as a tax credit. The remaining 80% stays part of your taxable rental income. For a higher-rate taxpayer with £30,000 mortgage interest, this represents approximately £9,996 in additional annual tax (including National Insurance).
Yes, but it’s partial. All individual landlords get 20% basic-rate relief automatically. To get full relief, you need a corporate structure (SPV). Corporate-owned properties receive 100% mortgage interest deduction.
- Failing to claim the 20% relief that IS available#
- Assuming FHL status provides relief (it was abolished on 6 April 2025)
- Not planning for the SPV transition costs before restructuring
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