Can I claim mortgage interest as a deduction on my rental property accounts?

You’re correct. There have been changes to the ability to claim mortgage interest on rental properties from April 2017. Initially, the costs were restricted to 75%, then 50% and then 25%. From the 2020/21 tax year, only a basic rate deduction was allowable. 

This restriction does not affect limited companies who own rental properties, or furnished holiday lets.  

The restriction is also known as the 20% tax credit for landlords, and provides 20% tax relief on the lower of: 

• Total finance costs  
• Property net profit before the finance costs have been deducted 
• Adjusted total income  

If the lower of the three figures is not finance costs (point 1), the difference will be carried forward. Any unused finance costs will be carried forward and added to the total finance costs for the next tax year. 

What other expenses can you claim against your property income? 

Here are some examples, the list is not exhaustive. 

• Agency fees, service charges and ground rent 
• Insurance 
• Repairs and maintenance 
• Mileage to carry out landlord checks 
• Accountancy fees 
• Council tax and other utility costs on empty properties 

What expenses can’t you claim against your property income? 

• Capital costs, including enhancements and improvements to the property 
• Costs that are not wholly and exclusively for the purpose of renting out the property 

For a more in depth look at landlord tax and allowable expenses please click here. 

Date published 8 Nov 2023

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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