Although finance costs, predominantly loan interest, are now disallowed as an expense that can be utilised to reduce taxable rental income, these charges do qualify for a tax credit limited to 20% basic rate Income Tax.

Although finance costs, predominantly loan interest, are now disallowed as an expense that can be utilised to reduce taxable rental income, these charges do qualify for a tax credit limited to 20% basic rate Income Tax. For example, if your loan/mortgage interest amounts to £10,000 this cannot be used to reduce your rental income. It will simply reduce your Income Tax bill by £2,000 (£10,000 x 20%).