Tx notes fa22 Final

2. Property losses 
If total expenses exceed total rental income, the property income assessment is 
nil
and the excess 
property loss is carried forward and o
ff
set against future property income profits only.
3. Finance Expenses on Property Income 
Tax relief for the costs of financing residential rental property is restricted to the basic rate of tax.
Finance costs are not deducted from property income. Instead, relief is given as a basic rate tax 
deduction from the individual’s income tax liability.
Basic rate restriction applies to 100% of finance costs relating to residential properties.
These special rules apply to interest and associated incidental costs (e.g. arrangement fees) on loans 
to:
– acquire, improve or repair a residential let property, and
– acquire equipment or assets used for the residential letting business.
Note that these rules do not apply to companies, commercial properties or qualifying furnished 
holiday accommodation (section 4). 
In 2022/23 for example: if a taxpayer incurs mortgage interest expense of £5,000 on a residential 
property, none of it will be shown as an allowable expense against property income, but it will 
instead achieve tax relief as a tax reduction at the basic rate of 20%, thus reducing the tax liability by 
£1,000 (£5,000 x 20%).
May 2022
Construction of a garage, replacing the car port
£2,000
June 2022
Insurance for year from 1 July 2022 (insurance for the previous year 
to 30 June 2022 was £420 paid in June 2021)
£480
November 2022
Drain clearance
£380
January 2023
New Cooker with integrated microwave oven replacing a cooker 
sold for £50 (a replacement cooker would have cost £300)
£550
May 2023
Redecoration (work completed in March 2023)
£750

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