Buy-to-let mortgage tax relief and changes

While a buy-to-let property can help in generating an additional income for you, you need to consider all costs, both upfront and ongoing to ensure that it is going to be a profitable project for you and best way to ensure the same is to get some financial and legal advice before purchasing a buy-to-let property. Costs which need to be considered are:

2017 witnessed a major change in the buy-to-let taxation policies which were originally announced in the year 2016; however, they got implemented in the year 2017 and it mainly affected mortgage interest payments. Before 2017, it was possible for the higher rate taxpayers to offset these payments against their rental income however, from 2017, it became difficult and thus resulted in higher tax bills.

In simpler words, earlier people buying to let have been able to claim Buy-to-Let Tax relief on their mortgage interest payments at their marginal rate of tax i.e. the basic rate tax payer would get 20% tax relief whereas the higher rate tax payer would get 40% tax relief and top-rate taxpayers could claim 45% tax relief. However, post the changes to buy-to let tax relief, a flat 20% tax relief will be available to all, irrespective of whether you are a basic or a higher or a top-rate taxpayer. So, those who were at basic rate tax would see no change but those who were at higher or at a top-rate tax band will find losing more money.