Unincorporated landlords letting out residential property are no longer able to deduct all finance/interest costs from their rental profits when calculating their tax liability.
Instead, individuals can only claim a basic rate tax reduction, worth just 20% of the lower of the:
a) finance costs not deducted from income in the tax year
b) the property business’s profit.
c) total income (excluding savings income and dividend income) in excess of personal allowances.
One possible way to avoid the impact is to incorporate your property business (because it only applies to unincorporated businesses); however, there are a lot of factors to consider before making this move and forward planning is essential.
Importantly for many investors in the Lake District, the restriction doesn’t currently affect holiday lets, hotels, or B&B’s