Mortgage Arrangement and Broker Fees — How Relief Works
Not an expense: a Section 24 credit. Which fees count as finance costs, the caps, timing, and why the 2027 change widens the higher-rate gap.
The short answer
Not as an expense — as a Section 24 credit. Mortgage arrangement, booking, valuation-for-lending and broker fees are finance costs on a residential let. Like the interest itself they are not deducted from rental profit; instead 20% of the cost comes off your tax bill (22% from April 2027). Incidental costs of obtaining finance count; costs of buying the property do not.
This is where most landlords lose money to a misunderstanding. Since April 2020 no residential finance cost is an expense — but the definition of finance cost is wider than interest, and the credit applies to all of it.
What counts as a finance cost
| Cost | Treatment |
|---|---|
| Mortgage interest (repayment or interest-only — interest element only) | Section 24 credit at 20% |
| Arrangement / product / booking fee | Section 24 credit (incidental cost of obtaining finance) |
| Broker fee for arranging the loan | Section 24 credit |
| Lender’s valuation fee | Section 24 credit |
| Early repayment charge on remortgaging | Section 24 credit |
| Fee added to the loan (interest on it counts too) | Section 24 credit — spread if amortised on the accruals basis |
| Your own survey for buying (not for the lender) | Capital — CGT base cost |
| Capital repayments of the loan | Nothing — not a cost |
How the credit actually works
You add up all residential finance costs, do not deduct them, and then reduce your final tax bill by 20% of the lower of (a) the finance costs, (b) your property profit, and (c) your total income above the personal allowance. Where the credit is capped, the unused finance cost carries forward. Our Section 24 guide walks through the caps with numbers; the calculator applies them.
Why it hurts higher-rate landlords
A £1,500 arrangement fee saves a basic-rate landlord £300 either way. A 40% landlord would have saved £600 under the old deduction and now saves £300 — the fee costs them twice what it costs a basic-rate landlord after tax. From April 2027 the credit rises to 22% while their property rate rises to 42%: the gap widens.
Timing
Cash basis (default): the credit is claimed for the year you pay the fee. A fee added to the loan is treated as paid when the loan is drawn.
Commercial and furnished holiday lets
Finance costs on commercial property remain fully deductible. Furnished holiday lets lost their exemption when the FHL regime was abolished in April 2025 — they are now inside Section 24 like any other residential let.
What to keep
The invoice describing the work, proof of payment, and — for anything near the repair/improvement line — a sentence in your records saying what was there before. HMRC enquiries into landlord expenses turn on that single fact. Digital copies satisfy MTD’s record-keeping rules.
Where it goes under Making Tax Digital
If you are inside MTD for Income Tax (mandated from April 2026 above £50,000 gross), the cost belongs in your quarterly update under the matching expense category, in the quarter you paid it (cash basis is the default for landlords). Get the category right now — the final declaration only tidies totals, it does not re-classify. Check whether MTD applies to you.
ITTOIA 2005 ss.272A–274A (restriction and tax reduction; incidental costs of obtaining finance) · HMRC PIM2054/PIM2105 · gov.uk “Changes to tax relief for residential landlords” · 2027 credit rate from gov.uk Budget-2025 measures page. Checked 31 Aug 2026.
Quick answers
Not as an expense. They are finance costs, so you receive a 20% tax reduction on them under Section 24 (22% from April 2027) instead of a deduction.
Yes — fees for arranging or obtaining a loan are incidental costs of finance and qualify for the Section 24 credit.
A valuation required by the lender is a finance cost (credit). A survey you commissioned for your own purchase decision is capital.
Box 44 — residential property finance costs — not the expenses boxes. Putting them in Box 26 wrongly claims a full deduction.