News & Blog

In his budget on 8th July, the Chancellor announced that he is planning to restrict tax relief for interest and other finance costs incurred on loans to purchase properties for letting to the basic rate of income tax.

The change is to be phased in over a 3 year period starting in April 2017 with full implementation applying for tax year 2020/21.

The proposed method of calculation is quite complex and involves a deduction from tax of an amount equal to 20% of the loan interest.
 

The effect is shown in the table below:

 Tax Year 

 % relievable only at

basic rate 

 % relievable at

higher rate

 2016/17 

 0

 100

 2017/18 

 25

 75

 2018/19 

 50

 50

 2019/20 

 75

 25

 2020/21 

 100

 0

The new rule will not apply where a property meets the criteria for furnished holiday letting, nor will it apply to letting of commercial property.

There are no changes proposed for corporate landlords or for trustees.

If you want to know what this will mean for you, or if there is anything that can be done to minimise the impact on your after tax income, please contact Ian Huggett on 01271 374138 or e-mail ian.huggett@thomaswestcott.co.uk