We have seen so many changes over the last few years in the lettings industry, and one that has caused many to see red is the changes to mortgage tax relief. Being rolled out over three years, the new rules were introduced in April this year and affect any landlord who owns a property in their name, but not those owning property under a business or company.
Therefore, by 2020/21 any rental income that you earn will be taxable. In the past, your financing costs could be deducted from your rental income (or offset), as well as any other related costs, before calculating the tax owed. This is still the case, but the amount you can offset is being gradually reduced, as set out below:
2017 – 2018 = 75%
2018 – 2019 = 50%
2019 – 2020 = 25%
2020 – 2021 = 0%
So what happens instead?
All landlords will be subject to a flat mortgage tax credit, currently 20%, which should slightly reduce your tax bill. It is important that you budget for these changes, as we know that many landlords will see their profits reduced as a result.
You do have time to prepare for these changes, and we have been working with our landlords to find solutions to minimise the impact the changes will have on their buy-to-let businesses.
Don’t delay, call our lettings team today to discuss your situation.