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Where Taxpayers and Advisers Meet

Buy-to-let new tax changes on mortgage interest relief

Posts: 19
Joined: Thu Aug 01, 2013 5:05 am

Buy-to-let new tax changes on mortgage interest relief

Postby duf » Thu Oct 29, 2015 3:39 pm

Will new changes which will come in force from April 2017 effect BTL owner who got just sole BTL property and has no other properties and has interest only mortgage on that property that is rented out, and is only source of income received form that property.

Could interest on mortgage be still offset-it against profit after April 2017 given scenario ??

Obviously she is living in rental property as she has rented her sole property to be able getting generous income after expenses.

Any help is appreciated !

Posts: 924
Joined: Wed Aug 06, 2008 3:28 pm
Location: Loughborough

Re: Buy-to-let new tax changes on mortgage interest relief

Postby jpcentral » Thu Oct 29, 2015 6:00 pm

The answer to that is, "it depends".

Currently, full relief is allowed for mortgage interest so, if you are a basic rate taxpayer, the effective relief is at 20% and, if you are a higher rate taxpayer, the effective relief is 40%.

The proposals are that the relief will be limited to 20%, so a basic rate taxpayer will see no difference but a higher rate taxpayer will not be allowed the full interest deduction.

"Relief" probably isn't the right word to use but it gives the general idea. It is actually a limitation on the amount which can be deducted as an expense.

The legislation hasn't actually been passed yet and there are several campaigns under way to try to get the chancellor to change his mind or for MPs to vote against the proposals. Each landlord will need to evaluate their own portfolio to see how it might affect them. As has been pointed out by several accountancy and tax bodies, the legislation, as it is currently drafted, could mean that tax is payable even when the taxpayer makes a loss. This seems unfair and there seems a reasonable possibility that changes could be made before the final rules are determined. Who knows - but the rules will be phased in over a number of years which will give some time to unravel mortgage arrangements which could result in tax on losses.
John Perry
Central Business Services

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Joined: Fri Dec 05, 2014 1:18 am

Re: Buy-to-let new tax changes on mortgage interest relief

Postby GlobalTaxAdviser » Thu Oct 29, 2015 11:54 pm

While it is still early days like Jpcentral mentioned. The government intention (rather slyly I like to add) is to move landlords into a higher tax band

Actually the basic tax payer will see a difference as many could be pushed into a higher tax band due to the way the tax relief on interest is given

Basically you will add the Rental profit less costs (excluding interest) to your total income and then after the tax calculation is done then provide for the tax credit on interest.


Ian McTernan CTA
Posts: 1232
Joined: Wed Aug 06, 2008 3:02 pm
Location: Bedford

Re: Buy-to-let new tax changes on mortgage interest relief

Postby Ian McTernan CTA » Thu Dec 03, 2015 10:54 am

We're fighting this change on a number of fronts, as the whole concept of 'relief' for an actual expenses that you cannot avoid is a pile of rubbish. Try telling the mortgage company you want to reduce your payments and see how far you get.

There are various campaigns being run- personally I'm in touch with the person at the Treasury responsible for the idea, and my MP is in correspondence with the Treasury, pointing out just how inequitable the new rules are in practice.

In the meantime, we now have the SDLT tax rise to contend with too. On newspaper said it was a tax trick that you could get relief against your capital gains tax for it when you sell.. yes, 25 years from now lets say i sell that £275K property for £1m, I'll 'save' £3,360 or so in CGT (being 28% of £12,000 SDLT paid). Let's not get started on paying tax on inflation...

All BTL investors need to be seeking advice from professional advisors now and reviewing their positions- after all, SDLT change is in April as is the abolition of the wear and tear allowance.
McTernan Associates Ltd
Chartered Tax Advisers
Email through link on website:

section 44
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Joined: Thu Oct 30, 2008 12:47 pm

Re: Buy-to-let new tax changes on mortgage interest relief

Postby section 44 » Thu Dec 03, 2015 11:57 am

We're fighting this change on a number of fronts
Sounds like a hard fight with the media/general public opinion about house prices and BTL, coupled with the government pushing the private rental sector for large corporates/funds

I don't see them backing down and my prediction is that 3 years to 18 month PPR change (coupled with the interaction with lettings relief) won't be the end of that particular reduction.

There's a perception that individuals involved in BTL is grubby and greedy.

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