Mortgage interest tax relief for landlords changed in April 2017

Mortgage interest tax relief for landlords changed in April 2017

If you’re a frequent reader of our property blog, you’ll know that we’ve been covering a lot of announcements that affect landlords, and that includes the gradual removal of mortgage interest tax relief. In the 2015 Summer Budget, then-Chancellor George Osborne announced that by 2020/21, landlords would be unable to deduct mortgage interest costs, and on April 6th this year, the measures were brought into law, meaning landlords are now restricted to the basic rate of income tax (20%) when it comes to claiming tax relief on mortgage interest payments.

Before the tax relief measures were introduced, landlords could offset their mortgage interest against their rental income when the time came for self-assessment tax returns to HMRC. For example, if a landlord previously collected £5,000 a year in rental income from their buy-to-let property, and paid a mortgage interest of £4,000 a year, the landlord would previously only pay tax on the difference of £1,000. However, this is no longer the case, and mortgage interest has been restricted and will be phased out completely over the next 4 years.

In the tax year 2017/2018, landlords will be able to claim 75% of mortgage interest at the landlords’ prevailing tax rate, while the remaining 25% will be available at the basic rate. In the 2018/2019 tax year these numbers will be 50% and 50%, while in 2019/2020, the percentages will be 25% and 75%, and in 2020/2021, mortgage interest deductions will only be available to landlords at the basic rate.

Who will these tax relief changes affect and how?

These policy changes will impact buy-to-let landlords both within and outside the United Kingdom. The scheme applies to all landlords paying tax in the UK and renting out a property, either in the UK or abroad, but they will also apply to landlords managing a property in the UK from abroad. Property companies, commercial landlords, and landlords who manage holiday let businesses will be exempt from the new tax relief policy.

It is a little too early to say for certain, but as an experienced estate and letting agent in Cardiff, we expect tenants to also suffer, as many landlords will look to increase rent to offset the loss of income because of tax relief changes.

If you’re a landlord or property investor in Cardiff confused about new tax relief changes, or just don’t know about them, don’t delay, contact our experienced lettings team today. We can answer any questions you may have and provide more information about how the tax relief changes affect you personally.

You can contact us on 02920 668585, email, or pop into our Woodville Road branch in the heart of Cathays and speak to a friendly member of our team. If you’re looking to purchase a new property for your buy-to-let portfolio, or as your first investment property, we have hundreds of properties available in many beautiful Cardiff neighbourhoods.

02 June 2017


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