Mortgage Interest Relief on buy to let mortgage
Since 6 April 2017, the government has phased in the removal of interest for buy to let landlords. The restriction will be fully in place from 6 April 2020.
The finance costs that are restricted include interest on mortgages, loans (including loans to buy furnishings) and overdrafts.
The table below shows the amount of mortgage interest relief available:
|Tax Year||Percentage of finance costs allowable against rental income||Percentage of basic rate tax reduction|
The changes to 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 in excess of £100,000) and the implications on child benefit (where total income is in excess of £50,000).
The nil rate band in which Estates are not subject to inheritance tax remains at £325,000. If the value of Estates is over and above £325,000 then it is subject to inheritance tax at 40%.
The residential nil-rate band which was introduced on 6 April 2017 has now increased to £150,000 (£125,000 in 2018/19) per individual when their home is left to a direct descendant (child, grandchild, adopted or foster child or stepchild). Therefore, for the 2019/20 tax year the nil rate band is a minimum of £475,000 (£325,000 plus £125,000) if property worth £125,000 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 of the assets were left 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: Anthony Barron, Tax Manager, Plus Accounting
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