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Changes to Landlord Taxes That are Already in Force


It’s not an easy job being a landlord. You have to follow strict laws and regulations, ensure your property (or properties) are safe and well-maintained, and of course, you’re subject to a multitude of tax rules.


This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.


Limited tax relief on your investment property finance

Back in 2015, HMRC announced they would begin limiting the relief on finance costs to the basic rate of tax, making a landlord’s job even tougher.

They determined the changes would be phased in over a period of 4 years.

Beginning in the 2017/18 tax year, the percentages of finance costs that you are able to deduct from rental income starts at 75% and decreases by 25% each year, while the basic rate tax reduction starts at 25% and increases by 25% each year.

See the table below for how it applies for 18/19 – the current tax year.

Tax Year Percentage of finance costs deductible from rental income Percentage of basic rate tax reduction
2017/18 75% 25%
2018/19 50% 50%
2019/20 25% 75%
2020/21 0% 100%

Finance costs, for the purposes of this tax rule, refer to mortgage interest, fees incurred from mortgages or loans, overdrafts, interest on loans to furnish properties, and discounts, premiums, and disguised interest.

You must prepare for these changes if you are a UK resident that lets residential properties, regardless of whether they are in the UK or outside the country. The only exception to this rule is if you let furnished holiday rentals.

This mandate also applies to any non-UK resident that rents out residential properties in the UK, individuals who partner in the business of renting properties, and trustees or beneficiaries of trusts that are responsible for income tax on property earnings.

Though this new tax rule means landlords will enjoy more profits from their rental properties, it also means they will have more taxable income.


What are the possible additional consequences?

If your earnings are near the higher rate tax threshold of 40%, the extra income may push you over it.

Another possible consequence for individuals who receive Child Benefit is if your new profits increase your income to over £50,000, you could get hit with the High Income Child Benefit Charge.


Next steps

Anytime a new tax law is introduced, it creates another problem for landlords to figure out how to handle.

The safest course of action is to consult with a tax specialist who will be able to tell you exactly how you’ll be affected and provide guidance to figure out the best plan to move forward.

Dental & Medical Financial Services work alongside trusted and specialist tax advisers that can help you to minimise your tax, whilst staying within new regulations.


Want help with your property tax planning?
Investments | Financial Planning | Retirement | Save Tax | Protection |

Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.
Call Darren to discuss your options.

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