In the budget last Summer, The Chancellor announced that landlords will no longer be able to deduct 100% of their mortgage or loan interest costs from their rental income to calculate assessable profit.
Instead they will be able to claim the interest amount as a basic rate reduction from their tax liability. This means that basic rate tax payers will be unaffected, but if you are taxed at the higher rate you will lose out.
The changes will be brought in gradually over 3 years commencing 6th April 2017, allowing a lower percentage of finance costs to be deducted from profit as follows:
The balance of costs for each year can be claimed as basic rate relief . Any excess can be carried forward to the next tax year.
It is estimated 1 in 5 landlords will be affected by the changes.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.