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Interest costs for income tax purposes

An area that commonly raises questions regarding its deductibility against rental income is interest (often the single biggest cost for a landlord).

The rules are different for income tax and for corporation tax. For corporation tax rules, see the Deduction of interest against property income ― corporation tax rules guidance note.

Prior to 2017/18 (see below), interest was treated as a revenue expense for both commercial and residential properties, with the incidental costs of obtaining loan finance specifically allowed as revenue costs.

From 2017/18, the method of relief for residential property changed. Furnished holiday lets (FHL) for this purpose are specifically excluded from the change