Section 24 was introduced in April 2017 affecting tax relief for landlords. What this means is that landlords will no longer be able to claim mortgage interest, or any other property finance costs against net rental profit. Instead, rental profit will be taxed on the full rental income, not just the profit by 2021, affecting the pockets of the Uk’s landlords.
Year 1
From April 2017 – For the first 75% of your mortgage interest cost, the higher rate tax relief can still be claimed. The remaining 25% will have a basic rate of tax relief.
Year 2
From April 2018 – The first 50% of your mortgage interest cost, the higher rate tax relief can be claimed. The remaining 50% will have a basic rate of tax relief.
Year 3
From April 2019 – A higher rate tax relief can be applied to 25% of your mortgage interest costs. The remaining 75% will be at the basic rate.
Year 4
By April 2021 – Landlords will only be able to claim tax relief at the basic rate level of 20%.
These tax changes could tip some landlords into a higher rate tax bracket, and there could also be some landlords made to pay tax on properties that do not make a profit. For example a landlord making £10,000 of rental income but paying £10,000 in mortgage interest payments could find themselves paying £2,000 – £2,500 in tax (2020/21), as the tax no longer applies to the profit but the entire rental income.