Residential property finance-cost tax reduction (UK)
For the Finance Act 2025 assessment basis, an individual landlord’s relevant residential-property finance costs are generally not deducted in calculating property profits. Instead, relief is given as a basic-rate tax reduction, subject to the applicable limits and conditions. The treatment is different for companies and other situations; the TX-UK June 2026–June 2027 guide excludes the cap and carry-forward mechanics.
Worked example
Assume an individual landlord has £1,000 of qualifying residential finance costs and the applicable limits do not restrict relief. At a 20% basic rate the tax reduction is £200; the £1,000 is not also deducted in computing the rental profit.
Common mistake
Deducting the same residential finance cost from property profit and also claiming the tax reduction, or assuming the individual restriction applies unchanged to companies.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |