UK Landlord Tax 2026: Section 24 & CGT

UK landlords have spent the last seven years adjusting to Section 24, falling allowances and a CGT regime that now demands tax within 60 days of completion. The 2026/27 tax year does not bring a reset. Mortgage interest relief is still capped at the basic rate, residential CGT rates remain split at 18% and 24%, and the property allowance still sits at £1,000.

This guide explains how UK landlord tax 2026 works in practice. It covers Section 24, allowable expenses, the replacement of domestic items relief, CGT on sale, and whether incorporating a buy-to-let portfolio still makes the numbers work.

Section 24 explained — what changed for landlords

Before 2017, a landlord could deduct mortgage interest from rental income before working out tax. Section 24 of the Finance (No. 2) Act 2015 closed that route over four tax years. Since April 2020, mortgage interest gets a 20% basic-rate tax credit instead.

That sounds harmless. For basic-rate landlords it is. For higher-rate landlords it is a real cash hit.

Take a higher-rate landlord with £20,000 of rental income, £4,000 of allowable repairs and £10,000 of mortgage interest.

Under the old rules (pre-2017):

• Taxable profit: £20,000 − £4,000 − £10,000 = £6,000.
• Tax at 40%: £2,400.

Under Section 24 today:

• Taxable profit: £20,000 − £4,000 = £16,000.
• Tax at 40%: £6,400.
• Less 20% credit on £10,000 of interest: −£2,000.
• Net tax: £4,400.

Same property, same costs, same year — £2,000 more tax. The rules can also tip a basic-rate landlord into the higher-rate band on paper, because mortgage interest no longer reduces taxable income.

You can read HMRC's own walk-through on Tax relief on residential landlord finance costs.

Allowable expenses — what landlords can claim

Allowable expenses must be wholly and exclusively for the letting business. The familiar list:

• Repairs and maintenance — fixing a broken boiler, patching a roof, redecoration that returns the property to its prior condition.
• Letting agent and management fees.
• Buildings and contents insurance for the let property.
• Council tax and utilities during voids when you carry the cost.
• Ground rent and service charges on leasehold flats.
• Accountant fees for preparing the rental accounts and self assessment.
• Advertising the property for let.
• Direct travel costs to the property (45p per mile up to 10,000 miles).
• Mortgage interest — restricted under Section 24 as a 20% basic-rate credit, not a deduction.

Capital improvements are not allowable expenses. A new extension, a brand new kitchen that upgrades the spec, a converted loft — these are capital and reduce the future CGT bill, not the current income tax bill. The line between repair and improvement is one of the most common HMRC enquiry points.

A small cushion many landlords forget is the £1,000 property allowance. If your gross rental income is under £1,000, you do not need to declare it. If it is over £1,000, you can choose to deduct the £1,000 allowance instead of actual expenses — useful when actual expenses are tiny.

Replacement of domestic items relief

This is the only practical relief for refurbishing a furnished or unfurnished let.

You can claim the cost of replacing furniture, appliances, kitchenware and soft furnishings provided that:

• The replacement is for the tenants' use only.
• You no longer have the old item.
• The replacement is like-for-like — if you swap a basic fridge for a smart fridge with an ice dispenser, only the cost of an equivalent basic fridge is allowable.
• Initial fit-out is not allowed. Only replacements.

Keep the receipt for the new item and a record of the old one. HMRC tends to ask for evidence on this one.

Capital Gains Tax on sale — rates, deadline, Private Residence Relief

When you sell a UK residential property that is not your main home, you pay Capital Gains Tax on the gain. The 2025/26 rates after the April 2024 alignment are:

Taxpayer	CGT rate on residential property
Basic-rate	18%
Higher-rate / Additional-rate	24%

The annual exempt amount is £3,000. Above that, you pay CGT at the rate above on the gain.

The 60-day rule still trips up landlords. Within 60 days of completion you must:

1. Calculate the gain.
2. Report it to HMRC on the Report and pay Capital Gains Tax on UK property service.
3. Pay the estimated tax.

If the property was your main home for part of the time you owned it, Private Residence Relief reduces the gain. The final 9 months of ownership always qualify, plus the months you lived there as your only or main residence. Letting Relief is now limited to periods of shared occupancy with the tenant, so most landlords cannot claim it.

Capital improvements you paid for over the years now earn their place — they reduce the chargeable gain. So keep receipts for the loft conversion, the extension, the new kitchen, even if they happened a decade ago.

Incorporation — is a limited company worth it for buy-to-let?

The Section 24 rules do not apply to limited companies. A property company deducts mortgage interest in full against rental profits and pays corporation tax (currently 19% for small profit companies, 25% for £250,000+, with marginal relief in the middle).

That sounds like a win. The catch is the cost of getting your existing portfolio in.

Transferring a personally-owned property into your own company is a sale at market value, even between connected parties. That means:

• CGT on the way in — at 18% or 24% on the gain since you bought it.
• Stamp Duty Land Tax on the way in — the company pays SDLT on the market value, including the 5% additional rate surcharge.
• Lender refinancing — most BTL mortgages forbid transfer into a company, so you remortgage with a limited company product, often at a higher rate.
• Ongoing admin — Companies House filings, separate corporation tax return, dividend tax to take the money out personally.

Incorporation tends to pay off when:

• You have a sizeable portfolio (often 4+ properties) with significant mortgage interest.
• You are a higher or additional rate taxpayer where Section 24 hurts most.
• You plan to keep the company running for 10+ years to amortise the SDLT and CGT entry costs.
• You can leave profits inside the company for reinvestment rather than drawing them straight out as dividends.

It rarely pays off for a one-property landlord. It often does for someone with five rented houses paying 40% income tax. Model it before acting.

Five mistakes that cost landlords money

1. Treating improvements as repairs. A new kitchen that upgrades the spec is capital. Claiming it as a repair invites an HMRC enquiry years later.
2. Missing the 60-day CGT deadline. Late filing penalties on the property reporting service start at £100 and stack.
3. Forgetting jointly-owned properties. Each owner reports their share. Both must file if either of you crosses the £1,000 threshold.
4. Not splitting income with a spouse. A Form 17 election can move rental income from the higher earner to the lower earner where the property is jointly owned in unequal shares.
5. Refurbishing before letting and trying to claim it. Pre-letting refurbishment to make the property habitable is capital, not an expense. Get the property let first, then repair.

FAQ

Frequently asked questions

What is Section 24 landlord tax?

Section 24 restricts buy-to-let mortgage interest relief to a 20% basic-rate tax credit, regardless of your tax band. Higher-rate landlords feel the biggest hit — interest is no longer an allowable expense in the traditional sense.

What is the CGT rate on UK residential property in 2026?

18% for basic-rate taxpayers and 24% for higher-rate taxpayers. Residential property rates were aligned at these levels from April 2024. CGT must be reported and paid within 60 days of completion.

What expenses can a landlord claim?

Repairs, letting agent fees, insurance, council tax during voids, accountant fees, replacement of domestic items at like-for-like cost, and a 20% tax credit on mortgage interest. Capital improvements (extensions, kitchens) are not allowable but reduce future CGT.

Should I incorporate my buy-to-let?

Incorporation can shelter rental profits from Section 24 because limited companies still deduct mortgage interest in full. But the transfer triggers Stamp Duty Land Tax and CGT on the way in. Worth modelling carefully; it is not always the right answer.

Do I need to register for self assessment as a landlord?

Yes, if your gross rental income exceeds £1,000 a year. Even small landlords must register and file.

This article is general guidance, not personal tax advice. Speak to a qualified accountant before acting on it.