The amount of income tax relief that landlords can receive on the finance costs for residential properties, such as the interest on mortgages, will be restricted to the basic rate of tax.
This change will be phased in gradually over a four year period to give landlords a period to adjust.
- 2017/18 - the deduction will be restricted to 75% of finance costs, with 25% being available as a basic rate tax reduction.
- 2018/19 - 50% finance costs deduction and 50% given as a basic rate tax reduction.
- 2019/20 - 25% finance costs deduction and 75% given as a basic rate tax reduction
- From 2020/21 - all financing costs incurred by a landlord will be given as a basic rate tax reduction.
How to set mortgage interest as being tax deductible
The rules above are applied to debts set to have tax deductible interest. Debts are set as having tax deductible interest on the Debts screen > Advanced Settings > Details panel.
Tick the "Interest is tax deductible" option.
Published 02 September 2015, Release 4.0.19