Mortgage interest tax relief changes explained

How did the mortgage interest tax relief change?

Before 2017: The interest for your mortgage was 100% deductible. Since most landlords have interest-only mortgages (where you pay only the interest each month and the price of the property at the end of the period), you could basically claim all mortgage repayments.

After 2017: changes are rolled gradually (see below) and landlords receive a new tax credit - somewhat less generous.

The buy-to-let mortgage interest tax relief from 2018-19 to 2020-21

It will fall gradually each year:

Tax Year Mortgage interest deductible 100% Deductible at a 20% tax credit
2016-2017 100% --
2017-2018 75% 25%
2018-2019 50% 50%
2019-2020 25% 25%
2020-2021 -- 100%

The 20% tax credit applies to the lowest of:

  • mortgage interest
  • property profits
  • total income above the personal allowance.

What can I expect?

It all depends on two things:

  • is your total income (except allowable expenses, and mortgage interest will not be one of them) above the higher tax band (50,000 in 2020)?
  • will you make significant investments in your buy-to-let property, like renovations, repairs, or furnishings?

3 things can happen:

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