Honourable and personal residential letting experts


Mortgage Interest Relief – sounds boring, could be very expensive

Over the next 4 years a majority of Landlords (except those that own a property outright with no mortgage) will find they will be paying more tax on their buy to lets.  This is of course subject to government policy remaining unchanged – which after the result of last month who knows!

Why – because buy to let finance costs will no longer be accounted for when working out taxable profits. This will mean lower profits for Landlords who do nothing. From our research this means that a majority of Landlords plan to increase rents in line with this change, even if in the past they have been happy to keep rental below the market. Meaning no real change to Landlords but obviously the end user, the tenant, will be affected. Hence why it got the name of the Tenant Tax.

The cause of this is Section 24 ( full name Section 24 of the Finance (no 2) Act 2015 ) which was introduced in April 2017 and will be phased in over the next 4 years. What it means is that you will no longer be able to claim mortgage interest or any other property finance as tax deductible. Instead rental profit will be taxed at with at the basic rate you pay by 2012.

Will it affect me?

If you have mortgage interest on your buy to let – Definitely. Therefore you need to look at your finances and contact a tax specialist for advice. 2020 is just around the corner in property terms but you do need to get advice now so that you can understand the consequences and understand your options.

So there are options?

Yes – by talking to an accountant/ tax specialist you can find out how much higher your tax bill will be and look at ways to minimize it. There are a number of options that you may be given. Such as you could look at transferring property ownership to a spouse if they have a lower tax threshold. Set up a company to own your buy to let (but this could mean a bigger tax hit due to corporation tax). You could re mortgage the property on the lower percentage, or turn it into a holiday let. The right answer is going to be down to you and your individual circumstances.

A little chink of light

There are a few things that you will still be able to deduct such as letting agent costs/ advertising and general running of the property. Just remember that you need to make sure improvements are like for like.

How do we help?

The team at Maxine Lester are focused on your investment. We only deal with rental and have built up a portfolio of over 500 properties over the last 11 years. If we don’t have the answer we will know someone who can help you. Working with a number of independent financial advisers and tax specialist’s we can put you in touch with people that can give you the answer.