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What is Bridging loan?
Last verified 31 October 2026
A bridging loan is a short-term loan, usually secured on property, used to cover a gap until longer-term funding or a sale completes. Landlords use them to buy at auction, to renovate or to move fast.
Why it matters to landlords
Interest on bridging finance is normally higher than on a standard mortgage, and fees are added. For tax, HMRC's rental income guidance says the restricted finance costs for residential lets include mortgage interest, interest on loans and overdrafts and loan fees. Relief on those costs is limited to the basic rate rather than a deduction from rent.
That means a bridging loan used for a residential letting business usually gets a tax reduction at 20% of the cost, not a full deduction at your top rate. For a non-residential let such as a shop, HMRC says mortgage interest can be claimed as an expense. Keep the loan agreement showing interest and the arrangement fee separately, so your records show what each cost was for. Repayment of the capital is not a cost.
Example
Zoe let a flat she bought with a bridging loan, then repaid it after eight months through a remortgage. While it was let, £4,800 of interest and a £1,500 loan fee count as residential finance costs, so £6,300 enters her finance-cost relief calculation rather than being deducted from rent.
Related terms
- Finance cost restriction
- Remortgage
- Buy, refurbish, refinance (BRR)
- Loan to value (LTV)
- Pre-letting expenses