Another tax blow for landlords
3rd November 2017
Coming on top of the restriction of loan interest tax relief for landlords to the basic rate is another change of policy from HMRC regarding loans taken out on the security of let property and used for private purposes.
The scenario concerned is often where someone decides to move home but rather than sell their existing property they keep it and let it out to tenants – not that uncommon a scenario. Previously HMRC have allowed interest relief on borrowings taken out to acquire the new home, even though that money has not been used for a qualifying purpose (acquiring a property to let). Their policy has been to allow interest relief on a loan up to the value of the former home when it started to be let, and this policy has been supported by examples in official publications.
It is now being reported that HMRC has reversed this policy, which they are entitled to do as it has been a matter of practice rather than legal requirement. So landlords in this situation may find that their interest relief may be even further restricted from 20% to 0%.
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Author: Peter Hedgethorne, Director