Section 24 of the Finance Act 2015 might mean that over half of UK landlords will fall into a higher rate of tax.
Although their income might not have increased, some might end up renting at a loss.
Until recently, landlords were able to deduct the full cost of their mortgage interest payments on their rental properties before they pay tax. Starting in April 2017, mortgage, loan and overdraft interest costs will not be considered in calculating taxable rental income.
The changes will be phased in gradually over 4 years, starting from 5th April 2017. By 2020, 100% of finance costs will be restricted to 20% tax relief only.
This change could see many landlords with interest costs affected and end up paying more tax on their property income. In addition, landlords could be pushed into higher tax brackets which in turn could affect child tax credit assessments and student loan repayments, leaving landlords even more out-of-pocket.
Read more on our article on Section 24 for landlords