Imminent changes to tax relief for residential landlords: In Brief

Wed 08 Mar 2017

As of the 6th April 2017, landlords will no longer be able to deduct mortgage interest costs from their rental income when calculating taxable profit. They will instead be taxed on their total rental income, and receive tax relief on mortgage interest payments – however this relief will be reduced in stages, to 20%, by 2020.


As an example a landlord that receives £10,000 in annual rental income with mortgage interest costs of £8,000 will be taxed on the £2,000 profit. The taxable amount depends on whether you’re a basic, higher or additional rate taxpayer. So a higher rate (40%) taxpayer will pay £800.

From April 2020

Using the same scenario as above, the landlord will be taxed £4,000 (40% of £10k), and receive 20% relief on the mortgage interest of £8,000 – which would be £1,600. If you then deduct this from the £4,000 tax bill, it will leave a final bill of £2,400. This is THREE TIMES what it is now.

It is important to note that these changes are being phased in over the next 4 years (see chart below), however for those landlords with mortgages, it will ultimately mean larger tax bills and therefore reduced profits.

Tax year

Percentage of finance costs deductible from rental income

Percentage of basic rate tax reduction

2017 to 2018



2018 to 2019



2019 to 2020



2020 to 2021




The goverment believes these changes will discourage property investors from purchasing homes that could otherwise be snapped up by first time buyers. This, on top of the additional hike in stamp duty for second home owners, is a further blow to buy-to-let investors that rely on borrowing to fund their ventures.

For this group of property investors, the importance of attractive mortgage rates has never been clearer.

For a full rundown of these changes, and how they may affect you personally, you can visit

"I've been a landlord for 9 years and always found Lovetts to provide me with good honest advice and excellent all round service keeping me informed and the same can be said for their sales team who have recently sold my property. Highly recommend."

News Archive

July 2020

A guide to deposit protection schemes

June 2020

Meet The Team - Q&A Series: Anthony Charters

NEW electrical safety standards in force from 1st July.

May 2020

Re-opening the Housing Market: Our Approach

March 2020

Corona Virus - Tenant Update

February 2020

Meet The Team - Q&A Series: Amy Duffy

Meet The Team - Q&A Series

January 2020


August 2019

5 top tips to ensure you find the best tenants

July 2019

How To Make Your New House A Home

June 2019

6 top tips for a smoother property transaction

We now officially have an award-winning Sales Team!

February 2019

In Conversation: Q&A With David Hawkes, Land & New Homes Director

Are you prepared for the forthcoming Letting Fees Bill?

January 2019

BREAKING: Stricter rules for mandatory electrical checks

Fitness For Human Habitation Act Becomes Law

Fitness For Human Habitation Act is now live, but what does this mean for Landlords?

Why is pays to use an agency that specialises in land deals

October 2018

Self managing? How evicting a tenant could fail spectacularly

September 2018

How we handle the three D’s – Death, Divorce & Debt

August 2018

First time buyers outstrip movers for first time in 23 years

July 2018

What does the profile of a modern landlord now look like?

Could your garden offer you the financial security we all strive for?

The top 4 things that put off UK homebuyers on viewings

House sale failures in the UK fell from record high in first quarter of 2018