Part 3

Property income
Chapter 3

Profits of property businesses: basic rules

Tax reductions for non-deductible costs of a dwelling-related loan

Reduction for individuals: calculation
274AA
1
This section applies if for a tax year an individual is entitled to relief under section 274A in respect of a relievable amount or in respect of each of two or more relievable amounts, and in the following subsections of this section “
relievable amount
” means that relievable amount or (as the case may be) any of those relievable amounts.
2
In respect of a relievable amount, the actual amount on which relief for the year is to be given is (subject to subsection (3)) the amount (“L”) that is the lower of—
a
the relievable amount, and
b
the total of—
i
the profits for income tax purposes of the property business concerned for the year after any deduction under section 118 of ITA 2007 (“the adjusted profits”) or, if less, the share (if any) of the adjusted profits on which the individual is liable to income tax otherwise than under Chapter 6 of Part 5, and
ii
so much (if any) of the relievable amount as consists of current-year estate amounts.
3
If S is greater than the individual's adjusted total income for the year (“ATI”), the actual amount on which relief for the year is to be given in respect of a relievable amount is given by—
ATI/S × L
where—
S is the total obtained by identifying the amount that is L for each relievable amount and then finding the total of the amounts identified, and
L has the same meaning as in subsection (2).
4
Where—
a
a relievable amount,
is greater than—
b
the actual amount on which relief for the year is to be given in respect of the relievable amount,
the difference is the individual's brought-forward amount for the following tax year in respect of the property business concerned.
5
The amount of the relief for the year in respect of a relievable amount is given by—
AA × BR
where—
AA is the actual amount on which relief for the year is to be given in respect of the relievable amount, and
BR is the basic rate of income tax for the year,
6
For the purposes of this section, an individual's adjusted total income for a tax year is identified as follows—
- Step 1
Identify the individual's net income for the year (see Step 2 of the calculation in section 23 of ITA 2007).
- Step 2
Exclude from that net income—
  1. so much of it as is within section 18(3) or (4) of ITA 2007 (income from savings), and
  2. so much of it as is dividend income.
- Step 3
Reduce what is left after Step 2 of this calculation by the amount of any allowances deducted for the year in the individual's case at Step 3 of the calculation in section 23 of ITA 2007. The result is the individual's adjusted total income for the year.
Ss. 274A-274C substituted for s. 274A (15.9.2016) by Finance Act 2016 (c. 24), s. 26(1)