Tax Relief changes for Landlords

Tax information is based on our understanding of the tax legislation as at 13 September 2019, and may be subject to change.

No information on this site should be taken as tax advice. For advice you should consult with an independent tax adviser.

Up until the 2016/17 tax year, landlords could deduct mortgage interest and other allowable costs from their rental income, before calculating their tax liability.

From 6 April 2020, tax relief for finance costs will be restricted to the basic rate of income tax, currently 20%. Relief will be given as a reduction in tax liability instead of a reduction to taxable rental income.

The changes started to be phased in from April 2017, as the table below shows.

Tax relief on finance cost 2016/17 2017/18 2018/19 2019/20 2020/21
 Previous system 100% 75% 50% 25% -
New system - 25% 50% 75% 100%

See a more detailed example of how this phasing could affect a landlord’s net profit.

Tax relief changes calculator

We’ve developed a tax relief changes calculator that you can download. This will help you understand how your profits could be affected over the next few years as the changes are phased in.