Finance charges relief reduced to 0

[JonnyS]

Hi,

I am completing my tax return using the HMRC website (as per previous years) but for some reason this year it is not taking into account my finance charges. Normally I would see the finance charges x 20% to see the relief. But now it is reducing the finance charges to 0:

minus Relief for finance costs £200.00 reduced to maximum allowable £0.00 x 20% £0.00

Any ideas what might be triggering that? Total income for the year is around £21K, with about £7k profit from letting.

I had a look at previous tax returns and they seem to be fine (ie not 0 for the finance costs).

Thanks in advance.

[JonnyS]

Do you think it might be the fact that the income from property is less than my personal allowance, so therefore isn't taxed? And as such, the tax relief for £200 in finance charges has to be 0? Despite other income pushing me over the personal allowance?

[darthblingbling]

Did you claim the £1000 property allowance or something?

[JonnyS]

Did you claim the £1000 property allowance or something?

No, I didn't. My expenses were around £1600, (so the gross income from letting was £8.6K). Net profit was £7k, and then we had finance charges.

[darthblingbling]

What's the other income? I'm aware of one quirk that may explain it.

[JonnyS]

What's the other income? I'm aware of one quirk that may explain it.

It's income from bank interest. No "earned income". Having said that, I still have a tax bill to pay.

[darthblingbling]

Believe that is it then, it's the lower of the following:
- finance costs
- property business profits
- adjusted total income - the income (after losses and reliefs, and excluding savings and dividends income) that exceeds your personal allowance.

As your rental profits in isolation, as you have no other non savings income, is below the PA, finance costs will be limited to £0. But you can carry them forward.

[JonnyS]

Believe that is it then, it's the lower of the following:
- finance costs
- property business profits
- adjusted total income - the income (after losses and reliefs, and excluding savings and dividends income) that exceeds your personal allowance.

As your rental profits in isolation, as you have no other non savings income, is below the PA, finance costs will be limited to £0. But you can carry them forward.

Ah, thanks for clarifying, and upon checking, in previous years the rental property income was above the PA, so that's why I benefited from finance charge tax relief back then.