Landlord Tax Relief Changes on Investment Property

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With the new tax year having started last month, the latest changes to landlord tax relief come into force. Online agent MakeUrMove have detailed what landlords need to know about the latest changes.

In April 2017, the government introduced plans to reduce the level of mortgage interest tax relief for buy to let property investors.

Before this, landlords would be able to deduct mortgage interest and other costs associated with their rental property before they could work out the taxable profit.

Since its introduction, the government implemented a phased approach to the reduction in tax relief for buy to let investors. From 100 per cent in the financial year of 2016/17, it has reduced to 75 per cent in 2017/18 and 50 per cent in 2018/19.

The latest changes to landlord mortgage interest tax relief 

From April 2019, the level of mortgage interest tax relief landlords are entitled to has been reduced to just 25 per cent. 2020/21 tax year, landlords will no longer be entitled to any tax relief.

The loss of mortgage interest tax relief obviously brings extra financial pressure for landlords. This is at a time when landlords are already facing increased costs as a result of new measures by the government, such as the Tenant Fee Ban and the Fitness for Human Habitation Act.

As a result of these financial burdens, landlords may be concerned about their profit margins, and may have no option but to increase rents.

Expenses landlords can claim

While they may be losing tax relief on mortgage interest, there are still plenty of expenses that landlords can claim back against tax to mitigate their costs.

Such expenses include council tax, water and energy bills, insurance, letting agent fees, legal and accountancy fees, and maintenance fees such as gardening and cleaning.

Tenant Fee Ban

Don’t forget that the Tenant Fee Ban is fast approaching and comes into force on the 1st of June.

In essence, the Tenant Fee Ban means you’ll no longer be able to charge tenants for aspects such as referencing.


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