Tax relief changes for landlords coming | CPS Homes

New tax relief changes for landlords coming in 2017


In his 2015 Summer Budget, ex-Chancellor George Osborne announced a change to mortgage finance relief for buy-to-let landlords. Recently, HMRC has begun to explain more about what the changes will entail and how they will affect buy-to-let landlords when the new system is introduced on 6 April 2017.

George Osborne announced these changes – at the same time he introduced the removal of wear and tear relief, and changes to landlord stamp duty – in order to level the playing field in the property market, putting first-time buyers in a better position to buy property by having to compete less with buy-to-let investors.

What will the changes involve?

The new rules will see a 20% flat rate of tax relief introduced for mortgage and finance interest. The current system allows landlords to deduct mortgage interest along with other costs before calculating their taxable profit. That profit is then taxed at a marginal rate (standard rate of 20%, a higher rate of 40% and an additional rate of 45%).

The new scheme will mean that landlords are no longer able to deduct mortgage interest costs, but all landlords will be able to deduct 20% of tax relief regardless of what marginal rate they currently pay.

Other charges that will be taken into consideration besides mortgage interest include finance interest on loans and overdrafts.

Who will these changes affect?

This policy change will affect buy-to-let landlords within and outside the UK. The new scheme will apply to landlords who are paying tax in the UK and rent property in the UK or abroad, and it will also apply to expat or foreign landlords who are letting property in the UK even if they are managing the property from abroad.

However, there are a few investors who will not be tied to these tax changes, including property companies, commercial landlords, and landlords who manage holiday let businesses.

If a landlord’s portfolio contains a mixture of commercial and residential properties, then it will be their responsibility to find a fair way to split the interest between the different categories.

HMRC guidelines

The HMRC guidelines for the new tax relief scheme state that finance costs will not be used to calculate taxable property profits, instead the new system will first see income tax on property profits, along with other income sources, being assessed. Following this, any income tax liability will be reduced by a basic rate tax reduction.

This means higher rate tax payers are more likely to have to pay more tax on their property profits, while basic rate tax payers may not see as sharp an increase, if any, though they should have a good understanding of the tax changes.

Are you an investor or a buy-to-let landlord in Cardiff looking to expand your portfolio, or are you looking for advice and more information about tax changes? If so, CPS Homes is here to help! For more information, or to ask any questions, contact us online, email us at:, or pop into one of our three Cardiff branches. If you’re looking to purchase a new property, as one of Cardiff’s largest estate and letting agents, we have hundreds of beautiful Cardiff homes available online.

28 September 2016


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