Therefore, in the event of a bereavement, the basic rate tax reduction applies and is calculated as intended.

This tax information and impact note applies to individuals, partners , trustees, and certain beneficiaries of deceased persons estates to whom the finance costs restriction applies.

Legislation will be introduced in Finance Bill 2016 in order to:

• put beyond doubt that individual beneficiaries of deceased persons’ estates are entitled to the basic rate tax reduction;
• ensure that the total income restriction to the tax reduction applies where the relevant finance costs or property profits are higher than the total income;
• ensure that total income is a measure of the net taxable income after other reliefs; and
• ensure that any carried forward tax reduction is given in any subsequent year in which property income is received, even if there is no restriction on the deduction of finance costs in that year, for example, where the loan has been repaid.

The policy paper on Clarification to finance costs restriction for landlords is available here