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Gam2015
Gam2015 Posts: 146 Forumite
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in Cutting tax
Hi is the full mortgage interest an allowable expense for 2017/2018 tax return? I am a basic rate tax payer. Thanks

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  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    No. You can only claim a proportion of it now and get a bit knocked off your overall tax bill for the remainder.

    One of the consequences of this is that your BTL profits will be higher and may push you into a higher tax bracket.

    https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies
  • Gam2015
    Gam2015 Posts: 146 Forumite
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    My salary is 29k and my property income is £4800 a year
  • 00ec25
    00ec25 Posts: 9,123 Forumite
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    edited 18 March 2018 at 1:01PM
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    Gam2015 wrote: »
    I am a basic rate tax payer. Thanks
    as above, read the rules and understand how the calculation differs to previously since you must calculate your tax for your return anyway...

    post tour calculation if you want someone to check it, but it is your self assessment so you need to understand how to to do it and be able to do it yourself anyway

    that said, as only a 25% restriction applies for 17/18, it is more likely you will not yet have been impacted, unless you were "close" to being a high rate taxpayer anyway
  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    Gam2015 wrote: »
    my property income is £4800 a year

    Is that before or after mortgage interest? The killer with the new rules is that your "income" rises so it can push you into higher rate tax or removal of child benefits. The 25% basic rate relief comes off at the end of the calculation. Very subtle difference which people don't really understand the implications.
  • Gam2015
    Gam2015 Posts: 146 Forumite
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    I only charge £400 per month £4800 a year as i know them and they are a good tennant, So do you put your full mortgage interest down as an expense then they automatically deduct 25% from it. Thanks
  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    Gam2015 wrote: »
    do you put your full mortgage interest down as an expense then they automatically deduct 25% from it. Thanks

    No, for year 1 of the transition, you claim 75% of your interest in the normal way against the rents received upon which your "top line" tax is calculated. Then at the bottom of the calculation, you get relief for the other 25% at 20% basic rate.

    Year two, you'd claim just 50% against the rental income, and get basic rate 20% on the other 50% at the bottom of the calculation.

    If you're total income (i.e. wages plus rents) is far enough below the H/R threshold, there won't be a difference. It's the people just a few thousand below the thresholds that are the ones who'll be hit.
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    Or on income levels similar to yours elderly landlords entitled to Married Couple's Allowance would also find they might get less Married Couple's Allowance.
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