• Swindon & Wiltshire Experts
• Thursday March 12 2026
• Author Name: Michael Blaken

Landlords: remember to claim mortgage interest relief – Optimum Professional Services

Are you giving HMRC more than you need to, asks Michael Blaken of Optimum Professional Services

When it comes to property investing, every year some landlords hand over more tax to the HMRC than they need because they’ve become confused by, or forgotten about, mortgage interest relief.

It’s true, the system has changed from the time when landlords could deduct 100 per cent of their mortgage interest from their rental income before paying tax. Then, if you earned £10,000 in rent and paid £8,000 in interest, you only paid tax on the £2,000 ‘profit’.

Since the introduction of Section 24 (of the Finance Act 2015) landlords now pay tax on their turnover (gross income) and get a small credit back at the end for the mortgage interest relief – yet we are coming across a number of landlords who fail claim the relief at all.

Here is how mortgage interest relief works in 2026:

You pay tax on your full rental income (minus other allowable expenses like repairs or agents’ fees).

You then receive a 20 per cent tax credit based on your mortgage interest to reduce your final bill.

Also, bear in mind, if your property made a loss last year, you may be able to carry forward the unused finance cost relief to future years.

Because Section 24 only applies to individuals, many investors are now buying property through a limited company.

The benefit here is that companies can still deduct 100 per cent of mortgage interest as a business expense before paying Corporation Tax.

owever, moving an existing property into a company often triggers Stamp Duty Land Tax and Capital Gains Tax, so it’s usually a strategy for new purchases rather than a quick fix for old ones.

As we move through 2026, the tax environment is changing.

In April 2026, Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is being introduced for landlords with turnover of £50,000 and above.

Under MTD for ITSA, those affected must start using compatible software to keep digital records and send quarterly updates to HMRC.

If you are self-employed as well, this £50,000 limit covers turnover from sole trade and rental income.

Also be aware that from April 2027, the Government plans to introduce separate, higher tax rates for property income (potentially 22 per cent, 42 per cent, and 47 per cent).

Your 20 per cent credit will become even more vital as your base tax rate rises.

Michael Blaken is accounts director at Optimum Professional Services

Optimum