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Posted Wed, 07 Jun 2023 14:17:51 GMT by Kliment Paskalev
I have read conflicting information on whether mortgage interest rate can be deducted as an expense. The answer might depend on several factors, so let me share my case: My case is that I have a residential mortgage for my first home where I live. I do travel a lot because of my work and family so I can afford to rent out my flat for more than 105 days a year. I rent it out on Airbnb and have set the maximum stay length as 30 days. So far being compliant with the Furnished Holiday Let (FTL) criteria I guess (not sure if that affects anything). So question is, can I deduct my mortgage interest as an expense, only of course for the period my flat is rented out. For example, month's rent days are 15 (out of 30) and my mortgage interest for the month is 200. Therefore, question is - is the 200 * 0.5 (half a month) = £100 of month's interest eligible to be written off as an expense? Thank you.
Posted Thu, 08 Jun 2023 15:05:36 GMT by HMRC Admin 20
Hi Kliment Paskalev,

Mortgage interest payments are treated as a deductible when computing profits in respect of a Furnished Holiday Let .
The finance costs and interest restrictions set out in PIM 20250 onwards do not apply to loans taken out in respect of FHL's.
To qualify as a holiday let , the property must meet the availability condition ie, your property must be available for letting as furnished holiday accomodation letting for at least 210 days in the year.
From your comments it does not appear to meet this condition .
HS253 Furnished holiday lettings (2020) sets out the conditions for FHL

Thank you.
Posted Thu, 08 Jun 2023 15:21:20 GMT by Kliment Paskalev
Hello, Thank you so much for the quick response. I've had a look the the link you shared about FTL. I do have it available to let for 210 in the year, and I do managed to let it out for 105 days, so those two conditions I do meet. I probably didn't explain it well in my first thread. So first condition -The availability condition. Your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year I do have it available for that period. Second condition- ;The letting condition. You must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year" I did succeed in having more than 105 days of letting out the property. My loan is a Residential Mortgage take in May 2022. Does this mean then that I can deduct mortgage interest as an FHL expense as I'm meeting the availability and letting criteria? Thanks.
Posted Fri, 09 Jun 2023 07:40:16 GMT by HMRC Admin 8
Here is a link to the Helpsheet HS253 which sets out the conditions that must be met for a rental property to qualify as Furnished Holiday Lettings (FHL):
 HS253 Furnished holiday lettings (2023).
If your rental property qualifies as FHL then you would complete the FHL section of your tax return and there is a section on there to claim for loan interest and other financial costs as an expense.
Thank you.
Posted Sat, 17 Jun 2023 16:34:58 GMT by Kliment Paskalev
When calculating the mortgage interest that is deductible, is the calculation based on the month that is being made available, or is it based on the actual days that is has been successfully let? I've failed to find this specific explanation in the documentation. Example: interest for month is £100, month has 30 days and is being made available, only 20 days were actually booked and the month passes. Is the deductible interest 66% of £100 (20/30 days booked) or is is £100 because it was made available as a short-term let during that time? (regardless whether the base rate 20% for that cost of finance expense is then applied). Thank you.
Posted Mon, 26 Jun 2023 07:40:14 GMT by HMRC Admin 19

In your question, you have referenced “days booked”, which may suggest that you are letting out a furnished holiday letting (FHL). If this is the case, the link blow covers the scenario of when the FHL property is closed for part of the year, stating that as long as you do not live within the let property, you may deduct all expenses such as insurance and loan interest:

HS253 Furnished holiday lettings (2022)

If the property let is a residential property however, then the mortgage interest figure would be placed together as a lump sum, with the figure restricted to the basic rate. You can see further guidance on the restriction of finance costs here:

Policy paper Restricting finance cost relief for individual landlords

Thank you.

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