Deducting rental property mortgage interest and finance costs

If you rent out a property, HMRC let you claim a deduction on the interest and finance costs on any loan - in technical terms it's a basic rate tax credit, subject to certain restrictions.

You cannot claim a deduction for mortgage repayments - only the interest.

Do not tag the transaction as rental expense

Mortgage interest is treated differently to other expenses.

Two ways to claim interest

Choose the method that works for you - don't claim both ways (untied adds the amounts together when sending data to HMRC). If it's a jointly held property (or series of them) then you need to include only your share.

There is a tag for residential property interest

If you have a mortgage, you can use the tag to claim the interest element of any payment to the bank (remember to make sure you don't claim the repayment component - you may need to partially claim). You can also add the interest as a manual transaction, either during the year or at the end of the year.

You can alternatively enter the interest / finance cost separately in a box

You can alternatively enter your residential property directly as a total in our property form. Other interest also needs to be entered separately, and not tagged as a transaction.

You'll need to have details of the interest you have paid in the year, probably on a statement from your lender.

This is how to find the right place to enter the information.

Entering the data

In the untied mobile app

Navigate to Profile and select Income
Choose the Property option (this box may or not be highlighted depending on whether information has already been entered)

Select the "More Options" dropdown

Enter interest in whole pound amounts. This figure should come from the statement from your lender and press Save

untied will calculate the appropriate tax allowance and populate the relevant boxes on the tax return submission.

In untied Pro in the browser

Navigate to Tax Forms > UK Property (make sure you're in the right tax year!). You can do this via the dropdown, tapping on the form, or using the search tool.

If you've already tagged property transactions, then it should already be checked to include this section. If not, mark it and indicate how many properties you have.

Enter the interest paid in the relevant tax year. Don't forget to click save!

(Note that this order may not reflect the order in HMRC forms - the order we have it is the one that makes most sense for untied users)

In MTD does this need to be reported quarterly?

If you don't have the numbers you can't include them. Add your interest and finance costs once you get your statement from the lender, which may be after the end of the year. In this case untied will submit it as part of the end of year process.

Given the complexity around interest and repayment, it is more important to get this right by the end of the year than to risk including repayments etc in error through quarterly reporting.