Can landlords claim mortgage capital repayments?

No. The capital part of a mortgage payment cannot be claimed at all. Only the interest counts, and on a residential let it earns a tax reduction at 20% for 2026-27, then 22% from 6 April 2027.

Paying back the loan is not a cost of letting. GOV.UK lists "the full amount of your mortgage payment" as something you cannot claim: "only the interest element" counts. For a house or flat let as a home, even the interest is not taken off your rent. It goes in a separate pot and earns a tax reduction instead, which is the rule usually called Section 24. The figures below were checked on GOV.UK and legislation.gov.uk on 17 October 2026.

What counts and what does not

GOV.UK says restricted finance costs include interest on mortgages, loans and overdrafts, and "fees and any other incidental costs for getting or repaying mortgages and loans". HMRC's manual lists "loan fees, commissions, guarantee fees and fees in connection with the security of a loan" as incidental costs. In our reading a broker's fee for arranging a buy-to-let mortgage falls in that group.

When a fee counts depends on how you keep your accounts. On the cash basis, the default for most landlords, it counts in the year you pay it. If you use traditional accounting and your accounts correctly spread the fee over the life of the loan, HMRC's manual says you cannot take it all in the year you borrow.

The restriction only covers loans for dwellings. HMRC's manual says loans "wholly for commercial properties" are not affected, so a landlord of a shop or office deducts the interest as a normal expense. Where one loan covers a building that is partly a home and partly a shop, the interest is split and only the residential share is restricted.

Reading your mortgage statement

On an interest-only mortgage the monthly payment is normally all interest, so the whole amount is a finance cost. On a repayment mortgage each payment is part interest and part capital, and the split changes every year. Your lender's annual statement shows both figures. Use the interest line and ignore the capital.

A worked example

A landlord in England lets a flat for £15,000 a year and pays £3,000 in other costs. The repayment mortgage costs £850 a month, £10,200 a year. The annual statement shows £5,400 of interest and £4,800 of capital repaid. She has a salary as well, so her income is well above the personal allowance.

The £4,800 of capital gets no relief in any form. The 2027-28 line assumes the same interest that year. The reduction is worked out on the lowest of your finance costs, your property profit and your income above the personal allowance, so a landlord with little other income may get less in the year, with the rest carried forward.

The 22% figure comes from Finance Act 2026. From 2027-28 property income in England and Northern Ireland is taxed at 22%, 42% and 47%, and the reduction for residential finance costs is given at the 22% property basic rate.

Remortgaging to release equity

GOV.UK says "interest on any additional borrowing above the capital value of the property when it was brought into your letting business is not tax deductible". Interest on extra borrowing can count if the money is used wholly and exclusively for the letting business. HMRC's business manual gives the example of a landlord who increases her mortgage to buy a private home abroad: that interest is not allowed. HMRC accepts that you can take out capital you put into a business, but it also says that simply swapping your own capital for a loan does not on its own pass the wholly and exclusively test. In our reading, borrowing that takes back money you put into the letting business, up to the property's value when first let, can qualify, so keep a note of what the money was used for. Borrowing for your own spending does not qualify.

What this means for you

If you have been taking the whole mortgage payment off your rent, your recorded profit is too low. Put it right in your records before your next update or tax return. If you join Making Tax Digital (MTD) on 6 April 2027, finance costs must be kept as a separate digital record and sent as their own figure in each quarterly update, even if you send only totals for your other costs. In HMRC's software interface that figure is called residentialFinancialCost. GOV.UK lets you record either the interest or the full payment, but if you record the full payment you must adjust it before you finalise your tax for the year.

Steps to sort out your mortgage figures

1. Ask each lender for an annual statement showing interest charged and capital repaid for the tax year.
2. Record only the interest as a finance cost, and leave the capital out of your records or adjust it out.
3. Add any arrangement, product, broker or redemption fees to the finance costs: in the year you pay them on the cash basis, or as your accounts spread them if you use traditional accounting.
4. If you remortgaged, note what the extra money was used for and the property's value when first let.
5. Keep commercial lets apart, because their interest is a normal expense.
6. Check whether and when MTD applies to you with the free MTD check, and see the landlord section for more guides.