Residential Property Finance Cost Relief
![Residential Property Finance Cost Relief](https://whitingsllp.co.uk/wp-content/uploads/2023/04/AdobeStock_301954174-1-scaled-e1680709321701.jpeg)
It’s commonly known that, following changes introduced gradually from 2017/18, the method by which finance interest is relieved has changed dramatically. No longer can interest be deducted in full when calculating rental profits; instead, relief is provided by way of a 20% tax reducer.
With the recent increases in loan interest rates and the cost of living crisis affecting some individual’s earnings, it is important to remember that relief is not always guaranteed to be the full amount of interest paid in a certain tax year at 20%.
The maximum relief available is calculated as being the basic rate value (currently 20%) of the lower of the following:
- The amount of eligible interest;
- The rental profits for the year, less any property losses brought forward; and
- Adjusted total income, which is arrived at by taking an individual’s net income after losses and reliefs, less savings & dividend income, minus the personal allowance.
Any unrelieved interest will be carried forward to future tax years. It should be noted that, where commercial property and furnished holiday lets are concerned, the interest is relieved in the same way as before, being a full deduction against rental profits.
Our ‘Property Matters’ group would be more than happy to assist you with any queries.
Alternatively, you can contact your local office here: Contact Whitings LLP : Whitings LLP.
Disclaimer - All information in this post was correct at time of writing.