Confused about changes in tax relief on mortgage interest

by Readers Question

19:43 PM, 5th September 2016
About 2 years ago

Confused about changes in tax relief on mortgage interest

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Confused about changes in tax relief on mortgage interest

Confused about changes in tax relief on mortgage interest

When the Chancellor first released details of the changes to taxation for buy to let landlords, it was implied that they would only make a difference to those paying the higher rate of tax.

Then it became apparent that, by the time it was fully implemented, all landlords would be restricted to an allowance of 20% of their finance costs to be set against profits.

So surely as, whatever tax bracket we are in, we are all currently able to offset the whole of our finance costs against profits,for tax purposes, this will have an impact on all of us?

I am (currently anyway) a basic rate tax payer with 4 rental properties (and 3 mortgages) and am anticipating that the changes will impact on me, but now I read on moneyfacts.co.uk that ‘if you’re a landlord who only pays basic rate tax, this change won’t affect you’

Am I being a bit dim here?

Can someone clarify the position for me please?

Thanks

Tricia



Comments

Mark Alexander

19:52 PM, 5th September 2016
About 2 years ago

Hi Tricia

You are not being dim at all.

In fact, only a handful of MP's have managed to get their heads around the sophistry and even some accountants are still struggling with it.

By 2010 you will not be able to claim finance costs as an expense. On that bit you are right.

Your new 'fictitious' profit from lettings will be added to any other income you receive and you will pay tax (and possibly lose benefits) based on that figure.

Your tax bill will then be reduced by 20% of your finance costs. You misunderstood that part.

Not everybody will pay more tax but few landlords accept HM Treasury's estimate that only 1 in 5 landlords will pay more.

It is also safe to say that landlords who have borrowed heavily will pay a LOT more tax.

NW Landlord

8:22 AM, 6th September 2016
About 2 years ago

The more mortgage interest you have the more tax you pay its crackers and defies belief that it can actually be passed by people who are supposed to know what they are doing. Most MPs haven't clue what it is and voted for it people's lives being turned upside down I have learnt a lot about politics over the last 18 months we are being run by over privileged idiots who have no idea what they are doing In the main

Trish

17:15 PM, 6th September 2016
About 2 years ago

Reply to the comment left by "Mark Alexander" at "05/09/2016 - 19:52":

Thanks, that does seem to make sense

Mark Alexander

17:16 PM, 6th September 2016
About 2 years ago

Reply to the comment left by "Tricia Forrester" at "06/09/2016 - 17:15":

You're welcome


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