The mortgage interest tax relief is a tax credit that landlords of buy-to-let properties are eligible to claim in order to reduce their tax bill. It used to be the case that landlords could simply deduct their mortgage interest from their income, claiming it as an expense, thus reducing their Income Tax obligations.
Since April 2017, this is no longer the case. Landlords can no longer claim the whole of their interest as an expense, so they are now liable to pay more tax than before – if they are a higher rate taxpayer.
Landlords are taxed on their total annual income and can only claim tax relief at the basic rate of 20% on whichever figure is lower:
If you own multiple buy-to-let properties, it may be more tax-efficient for you to run your rental business as a limited company, as this still enables you to claim the interest back in the same way as you did before the change.
We understand that renting out a property can sound simple enough, until it comes to the finances and paperwork! Contact our team today for comprehensive guidance and support to get your accounts in order and ready for your Self Assessment tax return.