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Buy to let Landlords

Posted by on in Taxation
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The Chancellor will have upset many buy-to-let landlords with his announcement that from April 2017 tax relief on mortgage costs is to be restricted to the basic rate of tax. Landlords of residential properties have benefited from tax relief on finance charges, such as mortgage interest for many years. The mortgage tax relief for homeowners was withdrawn 15 years ago.

In a recent report, the Bank of England was clear that the huge growth of buy to let mortgages could adversely affect the UK economy. The drive for these mortgages is being partly driven by the new pension freedoms and the current low interest rate environment.

The reduction in the relief for finance costs for landlords will be phased in over four years from April 2017 and could be an expensive change for higher rate and additional rate taxpayers.

Deductions from property income will be restricted to:

  • 75% for 2017 to      2018
  • 50% for 2018 to      2019
  • 25% for 2019 to      2020
  • 0% for 2020 to      2021 and beyond

In addition, from April 2016, the ‘wear and tear allowance’, which allows landlords to reduce the tax they pay (regardless of whether they replace furnishings in their property) will be replaced by a new system that only allows them to get tax relief when they replace furnishings.

©Informanagement
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