Deduction of interest against property income 鈥� income tax rules
Owner-Managed Businesses
Guidance
This guidance note sets out the restriction on the deduction of interest again rental income for individuals with a residential property letting businesses.
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 鈥� corporation tax rules guidance note.
The deduction for finance costs relating to residential property is restricted for income tax purposes, see more details below. These restrictions do not apply to non-residential property.
Prior to the abolition of the furnished holiday lets (FHL) tax regime from 6 April 2025, FHL were, for this purpose, specifically excluded from the restriction and treatment for interest costs remained aligned with commercial property. From 6 April 2025 FHL treatment is the same as for ordinary residential lets, see the Furnished
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