Mortgage Interest Relief on buy to let mortgage
Income tax relief for interest on property loans for buy-to-let investors has been fully restricted to the basic rate since 2020/21.
The finance costs that are restricted include interest on mortgages, loans (including loans to buy furnishings) and overdrafts.
The restriction of relief for the mortgage interest will potentially have an impact on landlords as rental profits will increase, losses will be used up more quickly, total income will be higher and there is a possible impact on the reduction of the personal allowance (where total income is more than £100,000) and the implications on child benefit (where total income is more than £50,000).
| Tax Year | Percentage of finance costs allowable against rental income | Percentage of basic rate tax reduction |
| 2019/20 | 25% | 75% |
| 2020/21 | 0% | 100% |
Inheritance Tax
The nil rate band in which estates are not subject to inheritance tax remains at £325,000. If the value of an estate is over £325,000 then it is subject to inheritance tax at 40%.
The residential nil rate band which was introduced in 2016/17 has now increased to the maximum of £175,000 per individual when their home is left to a direct descendant (child, grandchild, adopted or foster child or stepchild). Therefore, for the 2022/23 tax year the nil rate band is a minimum of £500,000 (£325,000 plus £175,000) if property worth £175,000 or over is to be left to your descendants.
The nil-rate band will be higher if one spouse or civil partner has already passed away and all the assets were left to the surviving spouse or civil partner, with the possibility of a maximum exemption of £1,000,000 being available to the surviving spouse or civil partner.
For estates which are valued at over £2,000,000, the residential nil-rate band will be restricted by £1 for every £2 that this limit has been exceeded.
Author: Tax Team, Plus Accounting
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Date Published: 30 May 2019
Last Updated: 8 August 2022