A deduction can be claimed against rental income for finance costs, such as mortgage or other loan interest. This is only available on debt incurred to acquire land and buildings, or to finance repairs and improvements.
The rules governing the deductibility of finance costs have recently changed for individuals. The tax relief for finance costs, such as mortgage interest, is now restricted.
Instead of a simple deduction reducing the overall taxable profit, relief is given as a basic-rate (20%) credit against the tax payable on the rental profit. Prior to 6 April 2020, transitional rules were in place.
Care should be taken when increasing the debt against a property in the letting business. If this is done to extract capital for use outside the business, the tax relief available may be restricted.