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Landlords Tax Relief Changes

Up to the tax year 2016/17 landlords were able to deduct the interest on mortgages and allowable costs on the rental property before calculating their tax liability on the property income. From 6th April 2020 this relief will not be available, the Finance cost (Interest on mortgages, interest on bank loans and overdrafts to purchase the property) will be restricted to basic rate of income tax currently at 20%.

To better understand how this change may impact you I have provided examples from the gov.uk website of the different case studies. For the 4 example below 2016//17 Income Tax and Personal Allowances rates applied throughout. 

Example 1 - Impact before and after the restriction where there's no increase in tax

Taxes allowble to Property Landlords

Changes to mortgage interest relief for landlords

Example 2 - Impact before and after the restriction where there's an increase in tax

Example 3 - Impact of first year of phased reduction of finance cost

Example 4 - Carrying forward unused finance costs

Property taxes can be complicated due to the new rule from 2017/18 especially for new landlords. Keeping your books up-to-date can help you to submit your Self assessment return on time. 

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It may be more tax efficient to have a limited company. 

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Why wait? Email or call us today to see how we can help you with your bookkeeping needs.  Our price is very competitive. 

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