The UK government introduced significant changes to tax relief on buy-to-let mortgage interest in 2017, which have been fully phased in by 2020. Previously, landlords could deduct mortgage interest payments from their rental income to reduce their taxable income. However, this system has been replaced with a tax credit. Now, landlords receive tax relief at the basic rate of 20% on their mortgage interest, but they can no longer deduct mortgage interest directly from their rental income.
These changes primarily impact higher-rate taxpayers, who once received relief at 40% but now only get 20% under the new system. For some landlords, the change may result in higher tax liabilities, particularly if the interest payments push their total income into a higher tax bracket.
Additionally, some buy-to-let mortgages remain outside the scope of Financial Conduct Authority (FCA) regulation, depending on the specifics of the loan. If you’re unsure about how these changes may affect you, it’s advisable to consult a tax specialist.
Some Buy To Let Mortgages are not regulated by the Financial Conduct Authority.
