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TaxRobin
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I currently deduct all mortgage interest from rent buy

Customer Question

I currently deduct all mortgage interest from rent for my buy to lets. What does this mean:in 2017-18 the deduction from property income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction.
 in 2018-19, 50% finance costs deduction and 50% given as a basic rate tax reduction.
 in 2019-20, 25% finance costs deduction and 75% given as a basic rate tax reduction.
 from 2020-21 all financing costs incurred by a landlord will be given as a basic rate tax reduction.
Policy
Submitted: 1 year ago.
Category: Tax
Expert:  TaxRobin replied 1 year ago.
Hello,Buy-to-let landlords are now being hit by a restriction to tax relief on mortgage interest payments.The new rules are complex; basic rate tax relief is permitted only and will be phased in. Finance costs includes mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. No relief is available for capital repayments of a mortgage or loan. It means that Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs.The government is restricting the amount of income tax relief landlords can get on residential property finance costs (such as mortgage interest) to the basic rate of tax. They are phasing it ion over 4 years. In practice this tax reduction will be calculated as 20% of the lower of: the finance costs not deducted from income in the tax year (25% for 2017-18, 50% for 2018-19, 75% for 2019-20 and 100% thereafter), the profits of the property business in the tax year, or, the total income (excluding savings income and dividend income) that exceeds the personal allowance and blind person’s allowance in the tax year.Any excess finance costs may be carried forward to following years if the tax reduction has been limited to 20% of the profits of the property business in the tax year.
Expert:  TaxRobin replied 1 year ago.
Wanted to touch base with you and make sure all worked out.

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