New tax year, big buy-to-let tax changes

Landlords: what do you know about the new tax changes coming into effect?

Landlord advice

3 May 2017

The changes to tax relief for landlords that were announced by then-chancellor George Osborne in 2015 have now started to come into effect.

If you’re a landlord, or considering taking out a buy-to-let mortgage, here’s what you need to know about the phased tax-relief changes.

What is mortgage tax relief?

Up until now, a landlord has been able to claim mortgage interest tax relief. This means that if you rent out a property with a mortgage, you can claim tax relief on your mortgage interest payments.

From 6 April, the way landlords’ profits are taxed will start to change.

How will the changes affect landlords?

The changes will be phased in from the start of this tax year, and by 2020 the mortgage interest tax relief will drop to 20%, resulting in a significant change to net income for higher-rate taxpayers. It will also push some basic-rate taxpayers into the higher band.

If you’re a landlord who operates as a limited company, you won’t be affected by these changes.

Further changes

It’s a time of change for landlords. There was last year’s 3% increase in stamp duty and 2015’s mandatory smoke and carbon monoxide detector regulations – but there’s more to come. In 2015 it was announced that from 2019, capital gains tax will have to be paid within 30 days of completion of a sale of buy-to-let and second properties, instead of the current 18 months.

Another recent change was the end of the “wear and tear” tax relief, where landlords could automatically claim 10% of their rental profits for repairs, whether they had spent the money or not. Since 2016, receipts have had to be produced for actual costs, which means it's essential you know what allowable expenses can be claimed. 

To find out more about these changes and how they might impact you, take a look at our full explainer guide to landlord tax changes. Already renting out your buy to let property, or planning to soon? With AXA landlord insurance, we make protecting property simple.