Mortgage Interest Tax Relief Changes Introduced from Today

The Government’s mortgage interest tax relief changes for landlords will be introduced gradually from today (Thursday 6^th April 2017).

From today, the amount of mortgage interest and other finance costs that landlords can offset against tax will be reduced to the basic rate of Income Tax. The Government measure will be gradually introduced until 6^th April 2020, when it will be fully implemented.

This guide explains exactly how the mortgage interest tax relief changes will affect you: /government-guide-tax-relief-changes-residential-landlords/

Landlords must note that limited companies are exempt from the mortgage interest tax relief changes, which has caused many investors to change the structure of their portfolios.

Shaun Church, the Director of Private Finance, comments on the changes: “The new mortgage interest tax relief rules for landlords are threatening to become an example of Government regulation resulting in unintended consequences. By hitting landlords’ profits, the changes may ultimately make it even more difficult for prospective first time buyers to get onto the housing ladder.

“Not being able to fully deduct finance costs from their taxable income will leave some landlords with a tax bill that outweighs their profits. As a result, many will look to increase rents to compensate for the loss in revenue. Not only this, the changes are also limiting landlords’ investment appetite. With fewer landlords investing in new buy-to-let properties at a time of already restricted housing supply, and rental demand remaining high, this too could result in higher rents.”

He continues: “The only way of getting around the changes is to invest through a limited company. However, there are fewer mortgages available to these types of investors and they typically come with much higher rates of interest. There are also a whole host of tax implications to consider that make moving to a limited company structure far from a straightforward decision. Those considering it should always seek help from an independent mortgage broker, who can also provide access to a tax adviser.”

Worryingly, it was revealed yesterday that the majority of Britons are not aware of the mortgage interest tax relief changes.

If you haven’t already, it is essential that you seek financial advice regarding the new measures.