Questions and Answers
Mortgage interest on a buy to let
I have a mortgage on a buy to let property, how much of the mortgage interest can I reclaim?
In the past, it was fairly simple for a landlord to offset the interest for a mortgage on a buy to let property against the relevant rental income.
However, from April 2017, there was a significant change to the rules on tax relief for interest and other finance costs for residential landlords. The changes are being phased in over a 4-year period and by 2020/21 relief will be limited to a basic rate relief tax deduction.
During the transitional period, you’ll still be able to deduct some of your finance costs when you work out your taxable property profits.
Tax year |
Percentage of finance costs deductible from rental income |
Percentage of basic rate tax reduction |
---|---|---|
2017 to 2018 |
75% |
25% |
2018 to 2019 |
50% |
50% |
2019 to 2020 |
25% |
75% |
2020 to 2021 |
0% |
100% |
Higher and additional rate tax payers will be worse off as a result of the changes. Historically, they will have been receiving tax relief for their mortgage interest at the rate of tax they pay (i.e. 40 or 45%). But their relief will now be restricted to the basic rate of 20%.
An accountant should be able to forecast how the change will impact on your tax bill. Your local TaxAssist Accountant would be happy to review your affairs.
Date published 7 Jul 2017
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.Choose the right accounting firm for you
Running your own business can be challenging so why not let TaxAssist Accountants manage your tax, accounting, bookkeeping and payroll needs? If you are not receiving the service you deserve from your accountant, then perhaps it’s time to make the switch?
Local business focus
We specialise in supporting independent businesses and work with 100,000 clients. Each TaxAssist Accountant runs their own business, and are passionate about supporting you.
Come and meet us
We enjoy talking to business owners and self-employed professionals who are looking to get the most out of their accountant. You can visit us at any of our 409 locations, meet with us online through video call software, or talk to us by telephone.
Switching is simple
Changing accountants is easier than you might think. There are no tax implications and you can switch at any time in the year and our team will guide you through the process for a smooth transition.