The next big change for buy to let investors is the restriction in income tax relief for interest paid on buy to let mortgages.
With effect from 6 April 2017, income tax relief for interest payments & finance costs will be restricted to the basic rate of income tax.
The restriction will be phased in over four years, the cost restricted to basic rate each year is as follows: 2017/18 – 25%, 2018/19 – 50%, 2019/20 – 75% and 2020/21 – 100%.
The way tax relief for interest is given is also being changed. Your tax liability is initially calculated without any relief for interest costs at all. The tax relief is then given as a reduction in the tax liability. This compounds the impact of the change and will push more people into the higher tax rates.
Many property investors will be hit hard by these changes and are seeking to challenge them. A petition is already in progress and can be accessed via this link https://petition.parliament.uk/petitions/104880
At the time of writing it had approximately 49,000 signatures.
For more details contact Lesley Sutton on 01484 550037 or email email@example.com.