News

A further disincentive to invest in Buy-to-Let properties

  • May 12, 2016
  • By Hunters Law

Under new rules coming into effect from 6th April 2017, owners of second properties will face restrictions on the amount of tax relief they can claim on mortgage interest payments

In the Summer Budget 2015, the Chancellor launched the first of a two pronged attack on buy-to-let landlords, by restricting the tax relief available on buy-to-let mortgage interest payments (the other being the Autumn Statement announcement that Stamp Duty Land Tax rates would be increased by 3% on the purchase of additional residential properties from 1st April 2016).

Owners of let second homes can currently claim tax relief on their mortgage interest payments at their marginal rate of tax, so higher and additional rate payer landlords can claim 40% and 45% per cent tax relief respectively.

The reforms are being phased in from 6th April 2017, and from 6th April 2020, all landlords will be subject to a flat rate of relief of 20%.  The stages are as follows:

  • 2017-2018 tax year: the deduction from property income of mortgage interest payments will be restricted to 75% of those payments, with the remaining 25% being available as a basic rate tax reduction;
  • 2018-2019 tax year: 50% of mortgage interest payments can be deducted from property income, with the remaining 50% available as a basic rate tax reduction; and
  • 2019-2020 tax year: 25% of mortgage interest payments can be deducted from property income, with the remaining 75% available as a basic rate tax reduction.

As well as mortgage interest payments, the new rules will apply to interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans.

A notable exception from the new rules is for properties qualifying as furnished holiday lets, where the current rules will continue to apply.

For more information, please contact the partner having responsibility for your affairs, or for new business any partner in the Private Client Department.

Related News

Jun 15, 2021
James Letchford discusses the code for leasing business premises
Jun 02, 2021
Ian Layzell-Smith discusses excluding security of tenure from a commercial lease
May 26, 2021
James Letchford discusses authorised guarantee agreements
May 18, 2021
James Letchford discusses ‘green leases’ of commercial properties
May 04, 2021
Scott Battram examines the London and South East property market in 2020 and provides predictions for 2021
Apr 14, 2021
Peter Robinson discusses the practical issues arising from registration of land as a Town and Village Green (“TVG”)
Mar 24, 2021
Peter Robinson has been featured in the 2021 Spear’s Property Advisers Index
Feb 08, 2021
Peter Robinson discusses Indexation Based Rent Reviews
Jan 19, 2021
Peter Robinson comments on what new and existing landlords need to know in RBS HomeWise
Jan 04, 2021
Peter Robinson discusses The Supreme Court’s decision in Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd

© Hunters Law LLP 2021 | Privacy NoticeLegal & Regulatory | Cookies Policy | Complaints Procedure.

Hunters Law LLP is authorised and regulated by the Solicitors Regulation Authority (number 657218)