Rental Income ( Property Allowance+ Carry Forward Finance Costs ???)

Hi All, I am more or less aware how to calculate my owed tax (based on my working salary and rental income), taking into consideration the Property Allowance (£1,000) or Expenses. For the past years, the accountant was filing this for me , but this year i have decided to start using the online self assessment HMRC form. for the year 2023-2024, my property was mostly vacant, due to the previous tenant leaving and having to 'prepare' the property to be suitable to rent again. so for the year 2023-2024 my proportion (its a shared property i own 50%) of rental income was only £700 . I can see that i can claim the property allowance on the HMRC online self assessment form (but only up to 700, as it cannot exceed my stated rental income). So far so good, and i can see form the calculations that i will not pay any tax on this rental amount. However, i also have a finance cost for my share of 50% of the property which comes to £1,500 (mortgage interest). i know and have seen examples on HMRC website on how i can calculate my owed tax based on 'expenses' rather than property allowance , but at this time it was 'easier' for me just to use the property allowance. My questions is this : I have rented the property out in July 2024 and I think i will be 'entitled' to pay less tax , if I use the 'expenses method' rather than the property allowance, if I use the Finance costs as the expenses....so : Can i carry forward this 'unused' expense of Finance Cost of £1,500 for next year (2024-2025) and use it in addition to next years finance cost (ie £1,500 from 2023-2024 + lets say £1,500 for 2024-2025 ) and next year for 2024-2025 self assessment i use the total of £3,000 Finance cost (1500 from 2024-2025 and 1500 from previous year brought forward) ?? OR, if i choose 'property allowance' for 2023-2024 i cannot make use of the 'take forward' to 2024-2025 of the finance cost ? I hope my question is clear and have not confused you ! Thanks, 

Name removed admin. 

Hi, I'm not a HMRC Admin but you'd only be able to claim the 24/25 finance costs against the 24/25 rental income. If you claim the property allowance for 23/24 then no expenses can be claimed for the 23/24 year (including the finance costs). You can't claim 23/24 expenses against 24/25 income (although if you had a loss from 23/24 or unused finance costs then those could be carried forward to be used against profits in future years).

HI
The finance costs are not an allowable expense but a relief. they therefore reduce any tax due on the actual profit you make but they do not reduce the actual profit. You can carry forward unused relief. as it is a relief it is not part of the property allowance. If there is no tax to pay on your rental income or if there is no profit then the finance costs will show as 0 to then allow you to carry them forward to later years.

Hi BellaBoo and HMRC Admin, Thank you for your responses I will try and fill out my self assessment to 'carry forward' the finance costs . If i find myself stuck and not figuring out how to do it, I will call HMRC :) Thanks for the information ! G.

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4460 "Where a landlord has residential finance costs that would be restricted in that tax year because of ITTOIA05/S272A, they will have the choice to: either claim their expenses (including any allowable finance costs) and the reducer or use the property income allowance (whether Full or Partial Relief) Where the choice is made to use the property income allowance, a carried-forward amount, as defined by S274A(6) cannot be created for that year to be used against the individual’s future years’ income tax liability."

Hi BellaBoo, Very interesting info you have there. which contradicts the HMRC Admin response. I will read more about it (link provided) and any articles mentioned there. Thanks once more George

No, you cannot carry forward unclaimed finance costs if you choose to use the £1,000 property income allowance. The allowance replaces any other expense deductions you might be entitled to, so if you choose the allowance, you lose the option to deduct finance costs in the current year or carry them forward to future years.

Just want to double check. I didn't claim the financial cost in year 2022-2023 £1000 (due to low income). So can I add the £1000 to my 2023-2024 financial cost ? (e.g. financial cost 22-23 £1000 + financial cost 23-24 £1500 = £2500 in 23-24 self assessment financial cost box)

Hi ,
 

Yes you can claim unused finance costs from a previous year.  You need to amend your 2022-23 tax return to include an entry in box 44 on the SA105.  You can then bring this entry forward into box 45 of your 2023-24 tax return plus claim your costs that relate to 2023-24 as normal in box 44.  So the entry in box 44 for 2022-23 would be £1000, the entry in box 44 on your 2023-24 tax return would be £1,500 and box 45 £1000.  Thank you.

I was looking at my 2021/22 tax return property pages and discovered that I claimed £1078 of losses instead of £1708 (typo error) Also I did not claim residential finance cost as well as unused finance cost. Can I write to request for the 2021/22 tax return or can this be included in the later tax returns? Thank you

Hi,
This forum is for general queries only and is intended to help you self-serve. We are unable to provide specific advice tailored to individual circumstances. 
You may wish to contact our Self Assessment team:
Self Assessment: general enquiries
or consider seeking professional advice. 
Thank you.

Hi, I have a related question and I’m struggling to understand it. For 23/24 my rental income is £6,000, my expenses are £5,381 and my adjustments are £1,025 resulting in adjusted loss for the year of £406. The residential property financing costs are £3,129 So after this is submitted, next year I will carry forward £406 loss as I understand it which is clear. I’m not clear about the residential property financing costs. I interpret the HMRC admin message above to say that a) this can be carried forward and b) that the way to carry it forward would be to put it as £0 for this year - is this interpretation correct? So next year then for the residential financing cost I would add the £3129 to whatever is the walking for the year and that would be fine? (As I don’t see separate boxes to bring it forward) Thanks, 

Name removed admin .

Unused finance costs can be carried forward for how many years? If you have several properties is it assessed on an individual property specific transactions or you can only use carry forward finance costs on that particular property profits? Pooling on several properties would obviously be more favourable

Hi Harry123,
You are  correct.
As you have a loss then no tax relief is applied in respect of the finance costs.
Thank you. 
 

Hi wonga78,
 Unused finance costs can be carried forward indefinately until there is sufficient profits to utilise them.
If you have several properties in your property business then the finance costs are used against the whole business income of all the properties and not against a specific property.