Finance Cost relief

Often also referred to as mortgage interest relief, the rules have recently changed.

Prior to 2016/17, landlords were able to deduct mortgage interest and other allowable costs from rental income, before the tax liability was calculated.

However, new changes have now been fully introduced and, from 6 April 2020, tax relief for finance costs will be restricted to the basic rate of income tax – currently 20 per cent.

Instead of a reduction in taxable rental income, relief will be applied as a reduction in tax liability.

Where your net income (before interest relief) is above £100,000 this can impact your tax position due to the withdrawal of personal allowances and restrictions on pension contributions.

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