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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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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Jo Mullett
Jo Mullett 07 Jul 2017

Here in Swansea, known as the Japanese knotweed capital of the UK, it never fails to amazes me that people have no idea of the potential problems this invasive non-native plant can cause when buying or...

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NathanG
NathanG 05 Jul 2017

McDonalds, for example, have been purchasing their real estate on prime locations for years. If something happens to the company they'll have invaluable assets that will be able to save them. We might

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Jonah
Jonah 04 Jul 2017

Graham: surprised to see you cite the "extra tax liability" as capping out at ?560. It doesn't - the extra tax is exponential, as it is levied on the income (i.e the inflating level of rental income you...

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Dianne Griffen
Dianne Griffen 29 Jun 2017

Be very wary of anyone bringing you deals that they have ?found? and want to ?sell on to you? or ?joint venture? with you on ? you need a proper legal contract for this, involve a RICs surveyor to confirm...

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jason hadzikostas
jason hadzikostas 28 Jun 2017

The most important thing is a budget. Students have to manage their spendings in food, house maintenance, books and many other things. According to me, student Studios are the perfect option for them as...

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SecomTech
SecomTech 22 Jun 2017

AT Last...This was discussed years ago and there was a move towards landlords registering their bad tenants on a database..(can't remember where) It seems a logical step though our leaders will probably...

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Bertrand
Bertrand 02 Jun 2017

How about the Welsh Govt introducing a scheme to protect landlords against "rogue" tenants who are then taken to court for criminal damage to the properties they trash. Pretty unlikely I suspect and politically...

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AmberMorris
AmberMorris 25 May 2017

"Please don't pick a novelty tune-playing doorbell. They're not 'fun'. They're stupid." Laughed a lot to this. It's actually true, though.

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