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British Chancellor restricts mortgage interest relief for buy-to-let landlords of residential property

From April 2017 there will be a reduction in the amount of mortgage interest relief available to individual buy-to-let landlords against their rental income.

At the moment mortgage interest relief is fully deductible against rental income so that landlords liable to income tax at the higher and additional rates of income tax effectively receive tax relief at 40% or 45%. However, under the new rules the rate at which interest relief is given will gradually fall to the basic rate of 20% by the tax year 2020/21.

The effect of this change in many cases will be to increase the amount of income tax paid by buy-to-let landlords thus reducing their net of tax rental income.

Depending on the amount of their UK source income, non-UK resident buy-to-let landlords will also be affected.

This change does not affect rental income received by companies but there are other significant UK tax issues involved in acquiring buy-to-let investments through a UK or non-UK company.

To read the full article, please click here. Draft legislation was published in the Finance Bill on 15 July 2015. 

This article was written by Tim Atkins.

For more information please contact Tim on tim.atkins@crsblaw.com or +44 (0)20 7203 8868.