Property income and loan interest deductions

Calculating the amount of tax relief for a landlord’s finance costs should be straightforward but does HMRC know how to do it? Let’s approach the subject as an examination question and to make it as easy as possible it will be an open book exam. Oh – and it’ll be multiple choice. To spice things up our fictional client could benefit by several thousand pounds if we get things right. The question concerns the tax liability for our client Ms Byta Lett on the basis of the following information for 2019-20.

The possible answers are:

(a) tax payable is £36 574; or

(b) tax payable is £44 374.

The relevant legislation

There are several statutory provisions that will determine the right answer:

• ITA 2007 s 23
• ITA...