In the summer 2015 Budget, the Chancellor announced that finance costs including Mortgage Interest Relief for residential landlords would be restricted to the basic rate of income tax (20%). Read more...
Finance costs include 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.
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.
Under the current rules the full amount of finance costs paid by Landlords are allowed as deduction against rental income.
The new rules will be introduced gradually over a three year period starting from 6 April 2017, and relief will be available as follows:
- In 2017/18, the deduction from property income will be restricted to 75% of the finance costs incurred, with the remaining 25% being available as a basic rate reduction.
- In 2018/19, 50% of the finance costs will be given as deduction and the remaining 50% will be given as a basic rate reduction.
- In 2019/20, 25% of the finance costs will be given as deduction and the remaining 75% will be given as a basic rate reduction.
Disclaimer and calculator assumptions
This calculator is best suited to a landlord who receives rental income and has no other taxable income other than PAYE employment or pension income.
Please note, this is a limited basic calculator, and is intended as an approximate guide. Every taxpayers' circumstances are different, and consequently, this may not be a true reflection of your actual tax position. There are a wide range of factors which may affect the result, for instance, if you have other taxable income, if you receive taxable benefits, if you contribute to an AVC pension, make gift aid donations or are in receipt of capital gains. This is just naming a few, and if you are in any doubt whatsoever, it is highly recommended to seek professional assistance from specialists property tax advisors such as RITA4Rent. We accept no responsibility or liability to any party who seeks to rely on the results of this calculator. For ease of comparison, we have selected the 2014/15 tax thresholds and rates, so as to give a more direct comparison. Please note that the thresholds regularly change, and it is recommended to review the Budget, so as to ascertain the tax threshold changes between now, and when the phase in is complete in 2020.
Please note that any contract for the supply of goods/services will be made between you and the provider of the goods/services; not with the Residential Landlords Association Limited or any of its associated companies. The RLA has no liability in relation to any contract entered into by you as the RLA only acts as an introducer.