Mixed-Use Property: Claim the Right Tax Relief as a Landlord

What Is a Mixed-Use Property?

A mixed-use property is one that serves more than one purpose. For buy-to-let investors, this typically means a property that is partly let to tenants and partly used for personal reasons, or occasionally used as a holiday home alongside commercial letting. The tax rules require you to apportion your allowable expenses to reflect only the rental portion of the property's use.

Mortgage Interest Relief: The Current Rules

Since April 2020, individual landlords can no longer deduct mortgage interest directly from rental income. Instead, you receive a tax credit worth 20% of your finance costs, applied against your Income Tax liability. This change, introduced under Section 24 of the Finance (No. 2) Act 2015, affects sole traders and individual property investors directly.

For a mixed-use property, you must first calculate what proportion of the property is genuinely let on a commercial basis. HMRC expects a just and reasonable apportionment, typically based on floor area, time let, or a combination of both. For example, if you let three of four bedrooms in a property and occupy one yourself, you can reasonably claim 75% of your finance costs as the basis for the 20% tax credit.

Document your apportionment method carefully. HMRC may challenge claims where the split appears arbitrary or overly generous to the landlord.

Council Tax and Mixed-Use Properties

Council Tax is a personal liability in most circumstances, and HMRC does not generally allow it as a deductible expense for a standard buy-to-let property. However, if you are letting furnished holiday accommodation or running a property that qualifies as a business letting, business rates rather than Council Tax may apply, which changes the picture entirely.

For properties that straddle personal and rental use, you may apportion Council Tax as an allowable expense only for the period and portion the property is genuinely available and let commercially. Keep dated tenancy agreements and occupancy records to support any claim. If you occupy the property yourself for any part of the year, that period's Council Tax is not deductible.

Furnished Holiday Lettings: A Special Case

If your mixed-use property qualifies as a Furnished Holiday Let (FHL), different rules historically applied, including the ability to deduct finance costs in full. However, the FHL regime was abolished from 6 April 2025. Properties that previously qualified as FHLs are now treated as standard residential lettings for tax purposes, meaning the Section 24 restriction applies and full mortgage interest deductibility is no longer available.

If you previously relied on FHL status to claim full relief, you should revisit your apportionment calculations and tax position urgently.

How to Apportion Correctly

• Floor area method: Calculate the percentage of the property used exclusively for letting and apply that percentage to your total mortgage interest and eligible expenses.
• Time-based method: If the property alternates between personal use and letting, divide costs by the number of days let commercially versus total days in the year.
• Combined method: Where rooms are used part-time for letting, combine both floor area and time-based calculations for a more precise result.
• Keep records: Retain mortgage statements, tenancy agreements, occupancy logs, and any correspondence with HMRC to substantiate your apportionment.

Practical Steps for Landlords

Review your property's usage honestly each tax year. Complete your Self Assessment tax return using the UK Property pages (SA105), entering only the apportioned figures for finance costs and Council Tax. If your circumstances are complex, consider using a specialist property tax adviser to review your methodology before submission.

Overclaiming relief on mixed-use properties is one of HMRC's current compliance focus areas. Accurate apportionment not only keeps you compliant but ensures you claim every penny of relief you are legitimately entitled to.