Relief on Buy-to-let mortgage interest will soon be restricted to just basic rate as the chancellor considered it “unfair” to allow landlords to obtain tax relief when domestic mortgagees can not. This is despite his regime treating B2L income as taxable trading. In my mind there is a clear distinction between traditional wealth investors and business owners, but these new rules “muddy the water” when looking at whether renting a property is truly a risk and rewards business.

So What?

There has been lots of press on this subject, but will it really make a difference to property investors? If you are a basic rate tax payer or have low gearing, very little will change, but watch out if your income is using most of your basic rate band as in future landlords will obtain basic rate tax relief on interest rather than providing it as a tax allowable expense. The difference could easily push your total income in to the higher rates with no other changes in circumstances. Proper tax planning is essential.


With consistently low interest rates, stable property prices in this area and some poor perception of pensions over the years, many have opted for property as a long term strategy and use mortgages to leverage the cash they can invest, so this change will result in a significant tax yield for the Treasury.

A company?

Many advisers are suggesting that a company structure will now be more favourable. That may be true for some, but for the average investor this is not the way forward for many reasons, not least the lack of a Capital Gains Tax exemption for Companies and the new dividend tax imposed on shareholders, so please seek personal, professional advice and plan carefully before looking at this strategy.

The real victim?

It is thought that most landlords will simply increase rents to cover the additional tax burden. With demand for rental properties outstripping supply by up to five times in the East of England, it seems logical that rents will increase without much fuss, meaning it will be the tenant not the landlord the suffers from the Chancellor’s attempt at dealing with “unfairness”.


The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

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