What is Section 24 and how does it affect landlords in 2026?

Section 24 stops landlords deducting mortgage interest as a business expense before calculating tax. Instead, since April 2020, you calculate tax on rental profit before interest relief and then claim a flat 20% tax credit on the interest you've actually paid. For a basic-rate taxpayer this roughly cancels out, because 20% relief is close to what you'd have received anyway. For a higher-rate taxpayer, who used to get 40% relief on interest, the drop to a 20% credit is a real cash cost. On a typical mortgaged Manchester rental this can turn a property that's marginally cash-flow positive before tax into one that loses over £150 a month after tax. If you're a higher-rate taxpayer with a mortgaged rental in your own name, run your specific numbers through a Section 24 tax calculator before assuming the headline yield is what you'll actually receive.

Is Manchester still a good buy-to-let investment in 2026?

Manchester still produces some of the strongest gross rental yields in the UK, commonly 6% to 6.6% on typical two-bed terraces and flats, and up to 7% or more in postcodes such as M11, M9 and M18. That headline is genuine. What it doesn't show is what happens after mortgage interest, running costs and tax are deducted, particularly for a higher-rate taxpayer holding the property with debt in their own name. Once you run the Section 24 maths, gross yield of 6.6% can translate into a monthly loss rather than income. Manchester still works well as a capital growth and lower-debt income play; it's a weaker bet as a highly-geared income play for a higher-rate taxpayer without restructuring.

Should I put my buy-to-let into a limited company to avoid Section 24?

Section 24 only applies to individual landlords. A limited company pays corporation tax on rental profit and can still deduct mortgage interest in full as a normal business cost, which is why incorporation has become common among higher-rate landlords with several mortgaged properties. The catch is that moving an existing property into a company usually counts as a sale for Stamp Duty and Capital Gains Tax purposes, and company buy-to-let mortgage rates and fees are typically higher than personal-name deals. Incorporation tends to make sense for landlords building a portfolio from scratch or holding properties with limited existing gains, and tends to make less sense for a single, long-held property with a large embedded gain. This is a decision to model with an accountant, not a general rule to apply automatically.

What is the EPC C deadline for landlords and how much will it cost?

The government has confirmed that rented homes in England and Wales will need an Energy Performance Certificate rating of C or above, or a registered exemption, by 1 October 2030, under the Warm Homes Plan (GOV.UK, 2026). The requirement applies to existing tenancies as well as new ones. Industry cost analysis (Property118 landlord cost survey, 2026) put the average spend to bring a private rented property up to standard at just under £6,900, with a spending cap of £10,000 per property (lower for cheaper homes) counting works carried out from October 2025 onwards. If your Manchester rental is already running a thin or negative monthly return after Section 24, budget for this cost now rather than in 2029, because a five-figure upgrade bill lands far worse as a surprise than as a planned expense.

Manchester's 6.6% yield hides a £151 monthly loss after tax

You bought into Manchester because the yield numbers looked unbeatable, and on paper they still do: gross returns above 6% when most of the UK is struggling past 4%. But if you're a higher-rate taxpayer running that property through a mortgage, the figure that actually lands in your account each month tells a different story. And it isn't the base rate doing the damage. It's Section 24.

Run the maths properly on a typical Manchester buy-to-let today, and a property yielding 6.6% gross can leave a higher-rate landlord roughly £151 a month worse off once tax is settled, even though the same property is marginally cash-flow positive before tax. A basic-rate taxpayer holding the identical property clears about £21 a month. That gap of more than £170 a month between the two tax bands isn't a quirk of one bad deal. It's Section 24, working exactly as designed.

What a typical Manchester buy-to-let actually looks like right now

Manchester's citywide average house price was £247,000 in April 2026, provisional (ONS/Land Registry HPI), up 1.3% annually. But that average covers everything from £600,000 detached houses to studio flats, and it isn't where the headline rental yields come from. The stock that actually produces Manchester's 6% to 6.6% yields is cheaper and smaller: two-bed terraces and flats trading around £210,000, renting for roughly £1,150 a month (Hunters/rentalyield.uk market data, 2026). Run those two numbers and you get a gross yield of 6.6%, before a single cost is deducted.

The postcode spread matters too. M11, M9 and M18 are producing yields around 7.1% to 7.3%, while city-centre flats in M1 and M3 are typically down at 4% to 5% (rentalyield.uk / Hunters, 2026). Use our buy-to-let yield calculator to check where your own property or target purchase actually sits before assuming it matches the citywide headline.

So if you're comparing Manchester yield tables to your own portfolio, check whether you're looking at the same sub-£220k stock the 6.6% figure is built on. A £247,000 "average" Manchester property yields meaningfully less than the number doing the rounds.

The cash flow looks fine, right up until tax

Take a £210,000 purchase at 75% loan-to-value: a £157,500 mortgage against a £52,500 deposit. The average fixed-rate buy-to-let mortgage stood at 5.42% on 1 July 2026 (Moneyfacts). On an interest-only basis, standard for most buy-to-let lending, that's £711 a month in interest. Add a 12% letting agent management fee (£138), a one-month-a-year void allowance (£96), landlord insurance (roughly £40) and a 10% maintenance reserve (£115), and monthly outgoings come to £1,100. Against £1,150 in rent, that leaves £50 a month before tax. Check your own figures against these assumptions with our mortgage calculator.

It's also worth noting this deal clears mortgage lenders' affordability stress tests comfortably: rent of £1,150 against interest of £711 is a rental cover ratio of 162%, well above the 125% (basic rate) or 145% (higher rate) thresholds most BTL lenders apply. Affordability was never the obstacle here. What happens next is.

So before you even open your tax return, this deal clears about £50 a month. That's thin, but it isn't the disaster some Section 24 headlines suggest: the real damage happens at the next step.

Section 24 turns £50 a month into a £151 loss for higher-rate landlords

Since April 2020, mortgage interest is no longer deducted from your taxable rental profit. Instead, HMRC (ongoing since April 2020) taxes your profit before interest relief, then hands back a flat 20% credit on the interest you actually paid. On this property, annual rent is £13,800. Deduct the non-finance running costs (management, insurance, maintenance: £3,516 a year) and taxable profit before interest relief is £10,284. Annual mortgage interest is £8,532.

A basic-rate taxpayer owes 20% of £10,284 (£2,057), less a 20% credit on the £8,532 of interest (£1,706), for a net tax bill of £350 a year, or £29 a month. Take that off the £50 monthly cash flow and they clear about £21 a month. A higher-rate taxpayer owes 40% of £10,284 (£4,114), less the same £1,706 credit, for a net tax bill of £2,407 a year, or £201 a month. Take that off the same £50 monthly cash flow and the property is losing £151 a month. Run your own numbers through our Section 24 tax calculator rather than taking the headline yield at face value.

The maths, in one place:

Purchase £210,000 at 75% LTV · Rent £1,150/month · Gross yield 6.6% · Net yield (before finance) 4.3% · Cash flow before tax +£50/month · Basic-rate tax £29/month, net +£21/month (+0.5% cash-on-cash on deposit) · Higher-rate tax £201/month, net −£151/month (−3.5% cash-on-cash on deposit).

So if you're a higher-rate taxpayer holding this kind of property in your own name rather than a company, you're not clearing £50 a month. You're paying roughly £151 a month for the privilege of owning it, once tax is settled.

The EPC bill still to come makes the maths worse, not better

None of the above accounts for energy efficiency costs. The government has confirmed that rented homes in England and Wales need an Energy Performance Certificate rating of C or above, or a registered exemption, by 1 October 2030, applying to existing tenancies as well as new ones (GOV.UK Warm Homes Plan, 2026). Industry cost analysis (Property118 landlord cost survey, 2026) puts the average spend to reach that standard at just under £6,900 per property, with a £10,000 cap counting work carried out from October 2025. Many of Manchester's higher-yielding terraces are older stock, exactly the type most likely to need this work.

So if this property is already losing £151 a month after tax as a higher-rate landlord, an unplanned £6,900 EPC bill arriving in 2029 or 2030 doesn't just erode the yield. It turns a marginal asset into one you're funding out of pocket on both fronts at once.

What this means for you

If you're a higher-rate taxpayer holding a mortgaged Manchester rental in your own name, the maths above points toward one of three moves. Refinance into a limited company structure, where mortgage interest remains a fully deductible business cost against corporation tax, restoring the relief Section 24 took away (though moving an existing property into a company usually triggers Stamp Duty and Capital Gains Tax as if you'd sold it, so this needs modelling with an accountant, not assuming). Sell before the EPC deadline forces expensive works onto a property that's already losing money after tax. Or accept that this asset is now realistically a capital growth bet rather than an income one, and stop pricing your expectations off a gross yield figure your tax position never lets you actually collect.

Most landlords who run these numbers properly, rather than trusting the yield table, end up doing one of the first two. Very few decide the status quo is worth keeping once they see it modelled month by month, and fewer still want to be the one funding a five-figure EPC bill on a property already running at a loss.

If you hold more than one Manchester rental in this position, the maths compounds rather than stays flat. Three identical properties at a £151 monthly loss each isn't a rounding error, it's £5,436 a year coming out of your other income to subsidise a portfolio that looks profitable on every yield table you've ever seen. That's usually the point at which landlords stop treating each property as a separate decision and start asking whether the whole portfolio's ownership structure needs revisiting in one go, rather than property by property as fixed rates happen to come up for renewal. If that's your situation, get a single incorporation and Capital Gains Tax review done across the full portfolio before acting on any one property, because the maths on selling or restructuring one asset in isolation can look very different once the other two are factored in.