New tax year brings mortgage tax relief changes

New tax year brings mortgage tax relief changes
Buy-to-let investors aren’t showing signs of being easily deterred, despite the Government’s crackdown

The changes to mortgage tax relief came into effect recently which means buy-to-let investors can no longer offset all their mortgage interest against their profits. Furthermore, by 2020, none of the interest will be tax-deductible.

Currently, under the new law which came into effect on 6 April,  landlords can offset 75 per cent of their mortgage interest against profits, but this will be reduced by 25 per cent each year, until it reaches zero in 2020.

Fortunately, landlords have had adequate prior notice of the tax changes, after they were detailed in George Osborne’s 2015 budget, and the four-year phasing in process will help investors adapt to the changes.

Higher rate taxpayers will bear the brunt of the impact, although a significant number of landlords could move into that higher rate tax bracket over the next four years if their rental income increased, given the current strong rental market.

As I’ve touched upon previously, investors appear to have taken various steps in order to weather the changes, including forming limited companies and switching to commercial and semi-commercial property investment instead of residential.


Others are believed to be looking at adapting their property portfolio so they don’t take as much of a financial hit; for example, selling up London properties where tax-applicable profits tend to be higher, and investing in more cost-effective buy-to-lets elsewhere in Britain where rental yields are higher.

Ultimately, only time will tell how the changes will affect property investors, and how they will adapt their business models to ensure maximum profitability, but the market’s resilience to previous changes to buy-to-let, in particular the three per cent stamp duty hike last year, should instil confidence.

Buy-to-let investors aren’t showing signs of being easily deterred, despite the Government’s crackdown. With historically low interest rates, a broad offering of buy-to-let mortgages, a shortage of housing in the UK and a growing rental market, property is still seen as an attractive investment option.

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

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Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

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Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

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Christian Donovan
Christian Donovan 18 Aug 2017

The write-down on house values, combined with the fall in the GBP saddled the fund?s property portfolio with a 1.4% loss in the second quarter. The shocking amount of $240 million.

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Samantha Goodman
Samantha Goodman 11 Aug 2017

Interesting point of view.

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Samantha Goodman
Samantha Goodman 11 Aug 2017

It depends on the people, some older adults decide to make a long-distance move in order to live closer to their children or settle in a place with a lower cost of living.

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brandonlee10
brandonlee10 24 Jul 2017

The financial ramifications of the triggering of Article 50, the starting gun for Britain's departure from the EU, are far from clear. Buyers will be most cautious in London, given that buying a home in...

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IrisJ.
IrisJ. 19 Jul 2017

Great advice, but may I also add that when buying an already built home, make sure you do all of the proper inspections. Most importantly pest inspection because people tend to get surprised when they

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IrisJ.
IrisJ. 17 Jul 2017

The third point is, in my opinion, the most important one. People have become too inconsiderate and careless when it comes to rented properties. If a landlord wants to protect their property, regular visits...

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cornishalan
cornishalan 10 Jul 2017

Added to the cost of purchasing these village properties are the above average maintenance costs. Particularly where the property is a listed building or requires specialist building skills such as thatching...

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