Unused residential finance costs brought forward

Can these costs be brought forward if the PA amount is not exceeded?

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I have a query over unused costs brought forward on a SA property page. 

Since the finance tax relief has been phased out over the past couple of years the set percentage of costs has been entered in the relevant boxes. 

In the majority of the examples on the Gov website showing how to work the amount of relief out (20% of the lowest amount of finance costs, profit, or total income exceeding PA) it shows the lower amount as being the finance costs. So all the finance costs are used to calculate the relief and none would need to be carried forward. 

In one example it shows property profit being the lowest, so that is used to work out the amount of relief given, and the difference between that and the finance costs is carried over to the following year to be added to the finance costs.

I've looked at the figures and finance costs are the lowest, however overall they are not exceeding the PA and wouldn't be paying tax anyway. This was the same last year, and the year before. Although the finance costs were the lowest, because they haven't actually benefitted from any relief does this make the amount "unused", and can the figure from last year's box 44 (residential finance costs not included in box 26) be put in box 45 as "unused residential finance costs brought forward"? If so I assume this would be the whole amount?

Circumstances may change in the future where the PA amount could be exceeded, in which case relief would be claimed. 

Replies (5)

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Scooby
By gainsborough
08th Nov 2021 17:29

It may be just me but am a little confused by your post.

You mention that the tax reducer is 20% of the lowest of finance costs, property profit and income exceeding the personal allowance and then state that finance costs are the lowest of the three in your case.

But the next paragraph then goes on to say that the income does not exceed the PA - which, if true, would make that figure the lowest of the three.

So, I guess my question is which one is true? Providing some numbers may help.

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Replying to gainsborough:
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By Tax Dragon
09th Nov 2021 03:07

gainsborough wrote:

It may be just me....

It's not.

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Replying to gainsborough:
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By ellectrastar
09th Nov 2021 08:29

gainsborough wrote:

It may be just me but am a little confused by your post.

You mention that the tax reducer is 20% of the lowest of finance costs, property profit and income exceeding the personal allowance and then state that finance costs are the lowest of the three in your case.

But the next paragraph then goes on to say that the income does not exceed the PA - which, if true, would make that figure the lowest of the three.

So, I guess my question is which one is true? Providing some numbers may help.

And there’s the answer staring me in the face! Think I’d looked at this for too long as even when I wrote it I didn’t see it. You’re right, the amount exceeding PA would be the lowest as it’s zero. So 20% of nothing is nothing, and there’s nothing to carry over. For future reference I’d be right in saying it would only be if the property profits or this amount exceeding PA were the lowest that a carried forward amount would be recorded (the difference between that and the finance costs)?

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Scooby
By gainsborough
09th Nov 2021 09:20

Glad it wasn't just me :).

If the income is less than the PA but finance costs have been paid, the tax reducer is then zero (as you say 20% of nothing is nothing) - but this means ALL the finance costs paid are carried forward as none have been given relief yet.

Your software should do this automatically if you put the numbers in.

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Replying to gainsborough:
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By ellectrastar
09th Nov 2021 19:19

gainsborough wrote:

Glad it wasn't just me :).

If the income is less than the PA but finance costs have been paid, the tax reducer is then zero (as you say 20% of nothing is nothing) - but this means ALL the finance costs paid are carried forward as none have been given relief yet.

Your software should do this automatically if you put the numbers in.

Yes you're right. I had this brainwave after I posted. I'm having one of those weeks I think. Looking back the figure that should have been in box 45 on the last tax return was not entered. Can this previous amount be added to the current one and entered on this year's return? Or is that amount lost now as it wasn't accounted for when it should have been? (FYI I'm helping out a friend so not using any software but wanting to make sure I get it right!)

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