Mortgage relief restriction for landlords
New measures announced in the April 2015 Budget took effect from 6th April 2017. The measures could impact up to 440,000 buy-to-let landlords according to the National Landlords Association (NLA). The changes will see the higher rate tax relief restricted on finance costs, such as mortgage interest payments and repair costs. This means all taxpayers with property businesses will be required to make tax return adjustments when calculating taxable rental profits.
The adjustment will give landlords a basic rate tax reduction of up to 20% of the financial cost after the rental profits have been taxed.
The change in higher rate tax relief will be phased in over three years from April 2017 as follows:
|
Year |
% of costs deducted from profits |
% of interest with Relief at 20% 2017/18 |
|
2017/18 |
75% |
25% |
|
2018/19 |
50% |
50% |
|
2019/20 |
25% |
75% |
|
2020/21 |
Nil |
100% |
How this could affect you
For the basic rate taxpayer this change could see you become a higher rate taxpayer, which will mean you’ll lose higher rate tax relief on your finance costs. Unfortunately, you will only discover if you are a high rate taxpayer once the finance costs are disallowed in your rental accounts.
How this truly affects you and your income is all dependent on your personal circumstances, other income, capital gains and other reliefs such as tax credits or child benefit.
If you would like to find out more about how we can help you with your rental property or portfolio – click here – http://www.fennwright.co.uk/homes-to-let/