Changes to tax treatment of income from Buy to Let properties
From April 2017 there is a new restriction on tax relief for finance costs for landlords letting properties.
- Mortgage interest relief will be restricted to the basic rate, given as a tax reduction and not as an allowable expense.
- This change is phased in between 2017 and 2020.
- Individuals will be able to claim a basic rate tax reduction from their Income Tax liability on the portion of finance costs not deducted in calculating their rental profit.
This tax relief will be calculated as 20% of the lower of:
- finance costs not deducted from income in the tax year
- profits of the property business in the tax year.
- total income (excluding savings income and dividend income) that exceeds the personal allowance and blind person’s allowance in the tax year.
Excess finance costs may be carried forward to following years.
Please get in touch if you require more information.