It has been two years since we first heard the announcement that Landlords’ ability to deduct mortgage interest would be gradually phased down by 2020.  A recent YouGov Report suggests that, on the whole, mortgaged buy-to-let Landlords are fairly well informed about the changes.  But with the first phase of the restrictions due for implementation on 6 April 2017 I thought it was worth revisiting the subject.

The amount of Income Tax relief landlords can get on residential property finance costs will be restricted to the basic rate of tax.  As we now know these restrictions will be phased in over the next four years.

The restrictions will affect:

• UK resident individuals that let residential properties in the UK or overseas
• non-UK resident individuals that let residential properties in the UK
• individuals who let such properties in partnership
• trustees or beneficiaries of trusts liable for Income Tax on the property profits

The phasing down of mortgage and other finance costs will be as follows:

Those who will not be affected by the restrictions and will continue to receive relief for interest and other finance costs in the usual way are:

• UK resident companies
• non-UK resident companies
• Landlords of Furnished Holiday Lettings

Most landlords who will be affected by the tax change will already be planning how they will prepare for the impact of the restrictions.  19% of the YouGov survey respondents declared that they would be making an increase to the rent.  Around one in five Landlords are considering either transferring the ownership of their property into a corporate structure or to a partner who pays a lower income tax rate.  About one-third are looking into remortgaging as a cost-saving option.

For more information or advice on the changes to mortgage interest relief and how it will affect you feel free to drop me a line at james.hill@brooklettings.co.uk or give me a call on 01489 570011.