Landlord tax in 2026: Section 24, Capital Gains and whether to incorporate.

What is Section 24, and why does it still hurt?

Section 24 of the Finance (No. 2) Act 2015 changed how mortgage interest is treated on privately held rental property. It was phased in between 2017 and 2020 and has been fully in force since April 2020, so it is not new. But its effect is widely misunderstood, because it does not reduce your costs; it changes the order in which tax is calculated.

You can no longer deduct mortgage interest from your rental income before tax. Instead, you are taxed on the full rental income, then given a tax credit worth 20% of your finance costs. For a basic-rate taxpayer that broadly nets out. For a higher-rate or additional-rate taxpayer it does not, because you are taxed at 40% or 45% on income you never actually kept, and only get relief back at 20%.

There is a second, quieter effect. Because your full rental income now counts as taxable income, your headline figure is higher. That can push a landlord who sits just under the £50,270 higher-rate threshold over it, dragging other income into the higher band and affecting things like the High Income Child Benefit Charge.

Which landlords does Section 24 actually affect?

The honest answer is: it depends on your tax band and how much mortgage interest you pay. The more you borrow and the higher your band, the harder it bites.

Rates and thresholds are for the 2025/26 tax year and apply to England. Figures are general and illustrative, not a personal calculation.

What about Capital Gains Tax when you sell?

When you sell a rental property held in your own name, Capital Gains Tax is due on the profit above your annual exempt amount, which has fallen to £3,000. For residential property the rates are 18% where the gain sits within your basic-rate band, and 24% on the part that falls into the higher-rate band. Most landlords in the patch selling a property that has grown in value over a decade will pay at least some of the gain at 24%.

The timing rules matter. You must report and pay Capital Gains Tax on a UK residential property sale within 60 days of completion, through HMRC's online service. That is a much shorter window than the usual Self Assessment timetable, and missing it brings penalties. Allowable costs, such as the stamp duty you paid on purchase, legal fees and qualifying improvements, reduce the gain, so keeping the paperwork from the original purchase is worth doing.

For a landlord with a property in Godmanchester or St Ives bought before the last decade of growth, the Capital Gains bill on sale is often the single biggest number in the decision, and worth modelling before you market the property.

Should you move your portfolio into a limited company?

This is the question Section 24 created, and it does not have one right answer. A limited company is not caught by Section 24: mortgage interest is a deductible business cost, and profits are taxed at Corporation Tax rates of 19% on the first £50,000 and 25% above £250,000, with marginal relief in between. For a higher-rate landlord with significant borrowing, that can look attractive on paper.

The trade-offs are real, though, and they are why incorporation suits some landlords and not others:

As a rough guide, incorporation tends to favour landlords building or holding a larger, heavily mortgaged portfolio for the long term, and tends not to favour someone with one or two lower-geared properties they may sell in a few years. It is a decision to model with an accountant on your actual numbers, not a default.

What should a Huntingdonshire landlord do with this?