Buy to Let landlords tax changing

Topic Author:

Sabina Burke

Topic posted on:

12:48 GMT 09.07.15

Post Author Date

From April 2017 individual landlords will no longer be able to claim tax reliefs worth 40% or 45% of the interest payments on their buy-to-let mortgages on UK and overseas property.

They will instead receive a basic rate reduction from their income tax liability for their finance costs on buy-to-let properties. This is primarily aimed at reducing relief for mortgage interest and creating a level playing field between landlords and homeowners.

This new measure will be phased in over 4 years from April 2017. Landlords will therefore be able to obtain tax relief as follows:

  •  in 2017-18 the deduction from property income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction.
  •  in 2018-19, 50% finance costs deduction and 50% given as a basic rate tax reduction.
  •  in 2019-20, 25% finance costs deduction and 75% given as a basic rate tax reduction.
  •  from 2020-21 all financing costs incurred by a landlord will be given as a basic rate tax reduction.

Currently interest payments of £100 only cost £55 for higher rate taxpayers after income tax relief, but will cost £80 from 2020.

This measure only applies to individual landlords, so corporate landlords are not affected.

Sabina Burke

13:47 GMT 09.07.15