Income Tax (Trading and Other Income) Act 2005 section 274AA

Reduction for individuals: calculation

Section 274AA sets out how to calculate the basic rate tax reduction that an individual landlord can claim in respect of finance costs (such as mortgage interest) that are no longer deductible from property income.

• The relief for each property business is based on the lower of the relievable amount and the taxable property profits (plus any current-year estate amounts), known as "L"
• Where the total of all L amounts across an individual's property businesses exceeds their adjusted total income, the relief is proportionally restricted and apportioned between businesses
• Any relievable amount that exceeds the actual amount on which relief is given is carried forward to the next tax year for that property business
• The tax reduction is calculated by multiplying the actual relievable amount by the basic rate of income tax, and adjusted total income is net income excluding savings and dividends, reduced by personal allowances