Sarah Bradford explains how tax relief is given in respect of interest and finance costs relating to mixed-use property lets and mixed portfolios.
All is not equal when it comes to tax relief for interest and finance costs, with the relief route depending on whether the property is a residential or commercial property, and also on whether the landlord is running an unincorporated property business or a property company.
What type of property?
For residential properties (including from 6 April 2025, those let as furnished holiday accommodation) let by an unincorporated property business, relief for interest and finance costs is given as a basic-rate tax reduction. What this means is that 20% of the interest and finance costs are deducted from the tax due on the profits of the property rental business, capped at the lower of:
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20% of the interest and
