Mortgage interest tax relief for landlords explained

If you let a residential property in your own name, you can't deduct mortgage interest from your rent when working out your profit. Instead, HMRC gives you a tax reduction worth 20% of your finance costs.

How it's worked out

1. Work out your rental profit: rent minus allowable expenses, but not mortgage interest.
2. Add that profit to your other income and work out your tax as normal.
3. Take off 20% of the lowest of: your finance costs, your rental profit, or your income above the Personal Allowance.

Any finance costs you can't use this year carry forward to next year.

Why it matters

For a basic-rate taxpayer, the result is often similar to deducting the interest. For higher-rate taxpayers the relief is still only 20%, so the tax bill is higher. Adding rental profit can also push you into a higher band.

Changes coming

From April 2027, the government plans separate tax rates for property income in England, Wales and Northern Ireland. Rental profit in the 2026 to 2027 tax year is still taxed at the normal rates.

Estimate your tax

Use the landlord tax calculator. It also checks whether the £1,000 property allowance would save you more.