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Landlords: how will the new tax changes affect you?

May 29th 2017
By: Melanie Hollidge
Landlords: how will the new tax changes affect you?

If you rent out property in the UK you might already aware of the changes to mortgage relief on buy to lets introduced in April this year. However according to a recent survey 47% of landlords were still unclear about how these changes will affect them between now and 2020. As these changes are being phased in over the next 3 years it’s important that landlords review their tax liabilities now rather than later.

The changes will affect anyone with a rental property but not including those landlords with furnished holiday lets and commercial properties.

Here is a summary of the changes to Mortgage interest tax relief:

Mortgage interest reduction: 2016/17 – 100%

Mortgage interest reduction: 2017/18 – 75%

Mortgage interest reduction: 2018/19 – 25%

Mortgage interest reduction: 2020/21 – 0%

Here is a summary of the changes to tax relief allowance on mortgage interest (this is based on the basic rate of tax):

Tax relief allowance on mortgage interest: 2017/18 – 25%

Tax relief allowance on mortgage interest: 2018/19 – 50%

Tax relief allowance on mortgage interest: 2019/20 – 75%

Tax relief allowance on mortgage interest: 2020/21 – 100%

As from April 2020 landlords will not be able to claim back any tax relief on their mortgage. However they will be able to receive a reduction on their end of year tax bill which will equate to 20% of the mortgage interest costs regardless of their tax band.

That's why many landlords in the UK are deciding to set up their buy to lets as a limited company to negate the impact of these changes. Although this might not always be the most viable option in terms of having to pay more for National Insurance.

If you would like to find out more about these recent buy to let changes why not call us to book in an appointment with our local Mortgage Advisor who can discuss your circumstances and best options going forward 020 8687 8345.