Record residential finance costs for landlords
This article explains how to record residential financial costs in FreeAgent and how the relief is handled.
For UK unincorporated landlords, residential finance costs such as mortgage interest and arrangement fees, cannot be deducted from rental income to calculate taxable profit. However, a tax relief can be claimed instead.
The value of tax relief that can be claimed on these costs will be the basic tax rate of 20%, of the lowest of:
- the amount of residential finance costs incurred
- the profit made from renting out properties in that tax year
- the so-called ‘adjusted total income’, which is the total income after taking off any losses or reliefs, and ignoring any savings or dividend income, that exceeds the personal allowance
Read further guidance from HMRC on residential finance costs for landlords.
Record residential finance costs in FreeAgent in an unincorporated landlord account
If you have an unincorporated landlord FreeAgent account, you can either explain the payment from your bank account, add an out-of-pocket expense or bill, and use the ‘Residential Bank / Finance Charges’ or ‘Residential Interest Payable’ categories. Learn the difference between an expense, a bill and a bank transaction.
FreeAgent will not treat those costs as part of the main costs. Instead, it will work out how much relief you're eligible to claim on them and include that on your Making Tax Digital (MTD) for Income Tax or Self Assessment return, whichever applies to you.
MTD for Income Tax return
For MTD for Income Tax returns, the relief is shown on the ‘UK property’ page in the ‘End of Year’ column, below the ‘Taxable Profit’.
Self Assessment return
For Self Assessment returns, the relief is included on the ‘Your Tax Breakdown’ page of your tax return.
Record residential finance costs in FreeAgent in a sole trader or limited company account
If you have a sole trader or limited company FreeAgent account type and complete a Self Assessment tax return, you’ll need to manually enter the amount of these costs you incurred in box 44 of the UK Property pages.
FreeAgent will then work out the relief you can claim.