Claiming mortgage Interest on BTL
Discussion
I know that the rules are changing for BTL and that you will no longer be able to claim the mortgage interest. I haven't seen anything that indicates that this will be the case but does this apply to all bar your first property in the same way as the increased stamp duty?
I'm asking because we have friends who own a property but when they started a family they couldn't afford a larger property so to keep a foot on the ladder they rent out their old place and rent elsewhere. It's not easy for them to do this but it's the only way they can try and get to retirement with a property right now so increasing the tax they pay would make life even tougher. To me it seems unfair and I think that everyone should be allowed one property that they don't get hit with extra tax on which should be their house (if they live in a house they own) or a nominated property. Before anyone says it then yes I understand that trusts, company ownership etc. would create loopholes.
I'm asking because we have friends who own a property but when they started a family they couldn't afford a larger property so to keep a foot on the ladder they rent out their old place and rent elsewhere. It's not easy for them to do this but it's the only way they can try and get to retirement with a property right now so increasing the tax they pay would make life even tougher. To me it seems unfair and I think that everyone should be allowed one property that they don't get hit with extra tax on which should be their house (if they live in a house they own) or a nominated property. Before anyone says it then yes I understand that trusts, company ownership etc. would create loopholes.
There is no direct correlation between the changes to loan interest relief claim for rental properties and the new Stamp Duty Land Tax surchage on 2nd or more properties.
Firstly, the restrictions for loan interest come into effect on 6 April 2017, so we have one more complete tax year (2016/17) where they will not apply yet.
Secondly, the restrictions aren't just to loan interest, but to ALL finance charges related to the rented property.
Thirdly, the costs are not completely restricted. A taxpayer will still get tax relief, but only at their basic rate of tax. This will obviously mean that those who earn enough each year to pay Higher Rate Tax will pay more tax under the new rules. Those who are only basic rate taxpayers will be less affected.
Fourthly, the changes are being phased in gradually over a four year period, so the initial impact wont be as bad in 20117/18. The full impact will be felt in tax year 2020/21.
Firstly, the restrictions for loan interest come into effect on 6 April 2017, so we have one more complete tax year (2016/17) where they will not apply yet.
Secondly, the restrictions aren't just to loan interest, but to ALL finance charges related to the rented property.
Thirdly, the costs are not completely restricted. A taxpayer will still get tax relief, but only at their basic rate of tax. This will obviously mean that those who earn enough each year to pay Higher Rate Tax will pay more tax under the new rules. Those who are only basic rate taxpayers will be less affected.
Fourthly, the changes are being phased in gradually over a four year period, so the initial impact wont be as bad in 20117/18. The full impact will be felt in tax year 2020/21.
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