BTL Mortgage Interest Changes

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A BIG change to Rental property income and examples of how the restriction of relief on buy to let mortgage interest will affect landlords.
By now I am sure you are all aware of the buy to let “bombshell” within the Chancellor’s Summer Budget – the proposal to allow income tax relief on BTL finance costs at the basic rate of tax only – but I thought it might be helpful to show how this will affect the net (after tax) returns to landlords.
At this stage this is just a “Policy Paper” and I am sure there will be considerable debate with interested parties before this is implemented. However, for now we have to assume that it will be implemented as proposed starting in 2017/18.
So the good news is that until April 2017 there is no change in the buy to let mortgage interest relief although a separate measure will get rid of the 10% “Wear and Tear” tax allowance for furnished lettings with effect from April 2016.
In looking at the impact of the proposals for interest relief I shall consider only the situation once the proposed measures come into effect fully in 2020/21 – during the preceding three years there is a “tapered” introduction of the measures. For the sake of easy arithmetic I shall assume that in 2020/21 the personal tax allowance is £12,000 and the basic rate band is £38,000, meaning that the higher rate band starts at £50,000.

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This information is provided as guidance only and is subject to change as tax rates/allowances etc change. This guide is correct at the time of creation to the best of our knowledge and by using this guide you acknowledge that Peers & Associates Limited will not be held responsible for any errors or omissions and your reliance on the information contained within in.
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