From 2017/18, tax relief on residential property finance costs such as mortgage interest payments will be restricted.

For 2017-18, the deduction from property income (as is currently allowed) is restricted to 75% of residential finance costs, with the remaining 25% being available as a basic rate tax reduction.

Partnership Tax

UK Properties

New boxes have been added to the SA801 (Partnership UK property) pages to cater for the restriction.

Your residential finance costs should be entered into box 1.40 at the bottom of page PL2. This amount shouldn't also be declared in 1.27.

Page PLN12 of the Partnership UK Property notes states:

Don't enter the full amount of the costs relating to residential property. Put the remaining 25% of residential property finance costs for non-corporate partners which were not entered in box 1.27 or 1.30 in box 1.40.

The return guide also provides notes for box 1.27 on page PLN 9 along with the working sheet on PLN 10 Show working sheet

To post these figures to Sage Personal Tax, please make sure you have entered the return period in boxes 1.1 and 1.2 of the UK property pages, and also applied profit sharing ratios before posting.

Foreign properties

Similarly new boxes have been added for foreign properties on pages PF4 box 2.30A and page PF2 box 2.10A

To post these figures to Sage Personal Tax, please make sure you have entered the return period in boxes 2.4 and 2.5 of the UK property pages, and also applied profit sharing ratios before posting.

Personal Tax

As the figures will have already been restricted on the partnership return, there is no further restriction to apply in Sage Personal Tax.

If you haven't posted your figures from Sage Partnership Tax, you'll need to enter the restricted amount under Earned income, Partnerships on the Tax adjustments tab in either the UK or foreign column.

• You'll need to have selected Partnership (full) on the Main details tab to enable this section.
• You'll need to have entered the property income on the Non-trading income tab and selecting the appropriate dropdown.

Entering property income on the Trading profit tab won't update the calculation as expected

• As this is the first year for this restriction, the brought forward fields are disabled.
• If your client's tax liability isn't high enough to utilise the basic rate reduction, this will carry forward to the following year as it can't be used to generate or increase a loss.

For more information on restricted finance costs please see Ask Sage 38067.