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Changes to Tax Relief for Landlords

From April 2017, the way in which landlords pay tax on their properties is going to change.

In a nutshell, until now, landlords have been able to claim tax relief on mortgage payments and loans for investment properties based on the tax rate they pay (in other words, 20% for those in the lower tax bracket, 40% for higher earners and 45% for those in the top tax bracket).

Over the next three years, however, the Government is phasing in a system where tax relief will be a flat 20% (basic rate) for all landlords.

So what does this mean? There will be no change for those landlords currently paying the lowest rate of tax, but those in the higher brackets will be hit with a tax increase on their mortgage payments.

It’s not all negative, of course. The changes will mean that landlords with smaller incomes are no longer at a disadvantage in the market – the playing field will be levelled so that everyone pays according to their means.

The Government has also sought to ease the transition by introducing it over three years, gradually reducing tax relief by 25% at a time.

Of course, landlords who own their investment properties outright will face no changes to current taxation. Additionally, companies with investment properties will not be affected.

What can landlords do, then, to make sure that their property portfolio is not hit too hard? One recommended method is to shop around for a better mortgage deal. Taking out a mortgage with a lower rate of interest will reduce the tax bill, given that the repayments will be smaller. This could help landlords to offset the increases – especially if they take out a fixed rate for several years.


At Julie Twist Properties, we can take the hassle out of your landlord finances by providing you with advice on mortgages, tax and investments. Why not get in touch today to talk with our trustworthy experts?


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