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Mortgage interest tax bombshell

The biggest tax deduction for landlords against their buy-to-let rental income is undoubtedly the mortgage interest paid by most landlords with a buy-to-let mortgage.

Landlords should be aware that they can only claim tax relief against the interest and not any capital repayments made against their buy-to-let mortgage.
Currently this tax relief is unlimited so that portfolio landlords are able to offset all the interest payments on loans used to finance the purchase of their buy-to-let portfolio regardless of the size of their borrowings.

However, in the FT over the last few days that there were the first murmurings that this allowance could be subject to a maximum allowance for each individual. The proposal introduced in the Budget is to set the limit for individual at £50,000 or 25% of their income if greater. The changes will be introduced if approved by new legislation later this year.

Mortgage Interest Tax Relief

The Financial Times reported at the weekend that buy-to-let investors cannot count on unlimited tax relief against mortgage costs next year under the ‘brave new world’ of capped tax relief:

“The idea that landlords might be targeted has been raised in the past,” said John Whiting, tax policy director at the Chartered Institute of Taxation, “and the fact that HMRC mentioned mortgage interest recently has added fuel to the fire.”

At the moment they are no firm proposals and any changes will need to go through a consultation stage and if they are introduced it will be as a result of new legislation. Because of the cap then it is likely to only affect larger landlords or those with high value properties. However the Budget has cast doubt on the whole aspect of tax relief claimed by landlords.

Property Hawk has always been alert to the potential threat to landlords livelihoods represented by an over bearing state and onerous tax system. We urge landlords to join our campaign and sign our e-petitions to protect mortgage interest tax relief before it’s too late and the politicians try and limit it or even to take it away completely.

Sign our E-petition

Calculating your tax

Compiling your tax return couldn’t be simpler with our PM3.0 FREE property management software for your buy-to-let investment portfolio.

Top ways of landlords saving tax

1.Ten top tax saving tips for landlords

2. Landlords claiming expenses

3. Landlords avoid tax return errors

4. A landlords tax liabilities

5. Capital Gains Tax on your buy-to-let

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