B6.202F Relief for finance costs of property businesses
Income tax payers may make a deduction for finance costs in computing the profits or losses of a property business, provided the costs are incurred wholly and exclusively for the purposes of the business, though this is restricted from 2017/18 onwards for residential properties. Finance costs include fees and interest payable on loans to buy land or property which is used in the business, or on loans to fund repairs, improvements or alterations. Similarly, interest payable under hire purchase agreements or on an overdraft is deductible where the asset is used for business purposes.
For companies the deduction of interest is dealt with under the loan relationship rules, see Division D1.7.
From 6 April 2017 onwards tax relief for income taxpayers who are residential landlords is restricted to the basic rate of tax, with the restriction phased in over a four-year period so that the full restriction applies in 2020/211 (see below). For HMRC guidance and examples, see Tax relief for residential landlords: how it's worked out.
The restrictions apply to overseas property businesses as well as UK property businesses, although they do not apply to the calculation of property business profits for the purposes of charging a company to income tax thereon (eg a non-resident company before 6 April 2020, see B6.215), other than where the company is acting in fiduciary or representative capacity2. They also do not apply to commercial property, furnished holiday lettings, loans for property development trades, or loans secured on