Relief for finance costs relating to rented property

What is the maximum allowable relief for finance costs relating to rented property?

Hi Anna Evans,
There is no maximum allowable limit for relief for finance costs relating to rental property, as long as the loan was used 'wholly and exclusively' for the purchase of the property.
The loan interest and any loan arrangement fees will normally be allowable as a revenue expense.
From tax year 2017-18 over a period of 4 years, the tax relief that landlords of residential properties get for finance costs was calculated differently and so was gradually all restricted to the basic rate of income tax.
From 2020/21 tax relief is restricted to 20% of the finance costs.
More information can be found at Property Income Manual PIM2052 - Deductions: interest: overview .
Thank you.

So I am confused then. My finance costs for 23/24 tax year are £13261 but relief has been restricted to 20% x £7454 with the comment: 'relief for finance costs £13261 reduced to maximum allowable.' My profit is £10763. Where has the £7454 figure come from?

I have figured this out. I have foreign rental income as well as UK rental income. The profit on my foreign rental income is lower than the finance costs, whereas the profit on my UK rental income is higher than my finance costs. So the tax relief is on my foreign profit plus my UK finance costs.

Hi,
Individuals will be able to claim a basic rate tax reduction from their Income Tax liability on the portion of finance costs not deducted in calculating the profit. In practice this tax reduction will be calculated as 20% of the lower of the:
finance costs not deducted from income in the tax year (25% for 2017 to 2018, 50% for 2018 to 2019, 75% for 2019 to 2020 and 100% thereafter)
•    profits of the property business in the tax year
•    total income (excluding savings income and dividend income) that exceeds the personal allowance and blind person’s allowance in the tax year
Any excess finance costs may be carried forward to following years if the tax reduction has been limited to 20% of the profits of the property business in the tax year. If the figures quoted in your question are specific to your own 2023-24 tax calculation, please contact us on 0300 200 3310.
Thank you.