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Loss of mortgage interest relief

Assuming you own residential investment property (not commercial, or semi-commercial) in your personal name and have borrowings against it, this tax year landlords will effectively only be able to offset 60% of the cost of the interest element of their loans from their rental income. Prior to 6th April 2017 landlords could offset 100% of their interest costs from their rental income. It then tapered down to 80% post 6th April 2017, and down to 60% post 6th April 2018.

The 40% of rental income which is no longer off set by the interest costs will be treated as ‘personal income’ and taxed accordingly.

If you are a basic rate tax payer this increased personal income will be taxed at the basic rate. However, if you are a currently a higher rate tax payer this will be at the higher rate.

Since April 6th 2018 you have 40% of the rental income which was off set by interest costs, no longer being off set.

A table showing the net effect of the tax changes is shown below:

2018/19 2019/20 2020/21
% GIVEN AS RELIEF AT 20% 50 75 100


You may find as the years pass by between now and 2020 that as a basic rate tax payer this additional personal income is enough to push you into a higher rate tax bracket.

What can you do about this?

Option 1: Do nothing – accept the changes

Option 2: Sell some, or all of your properties

Option 3: Move the ownership of your properties to a new legal entity E.g. Limited Company (Ltd) where mortgage interest is a business cost and can be 100% offset against rental income.

If you are considering Option 3 then we advise that you should take some tax advice, as if structured correctly you may not incur capital gains or SDLT in the move. It also may not be the best option for your particular scenario/goals, once all the variables are factored in, a chartered tax adviser can assist you with these sums.

We can also assist with arranging the financing for such a move through our ‘No Broker Fee’ brokerage

Consultation Steps


Pick an available consultation time and make a booking


Download and complete Asset & Liability, Income & Expenditure and Property Schedule templates


Upload the completed templates at least 36 hours before your consultation time


Adviser calls on the contact details provided at the time booked to discuss your options

Consultation Terms

This consultation shouldn’t be treated as formal advice and action shouldn’t be taken off the back of it.
Post consultation your tax adviser may deliver a number of potential formal advice follow-on options.
This may or may not include an analysis of the ‘do nothing’ option, which may help in your cost/benefit comparison.
Any formal advice will be quoted for in writing and full terms of engagement will be issued.

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