Mortgage interest tax relief

semma19

In The Times on Saturday their Weekend magazine had a piece on the impending self-assessment deadline and mentioned the 'new' rules for off-setting mortgage interest (the 75%/25%, to 50/50% etc etc depletion in the amount of interest that landlords can off-set against their tax bill). They mentioned the rules as being for people paying 40% tax i.e. not basic rate taxpayers, however everywhere else I'd read seems to suggest that the 'rule' is across the board no matter which tax band you belong to. Which is it?

For the record, I was a 40% tax payer in 17/18 and have already submitted my return according to the 75/25 rule, but I will be basic rate for 18/19 in its entirely so interested to know if this tax year's 50/50 split applies to me of if I can off-set all my mortgage interest.

Mouse007

The interest is being phased out of the property income computations before calculating tax and then given back as a 20% (only) deduction from your tax bill.



This makes no diffeence to basic rate tax payers, but does affect higher rate payers.


You still do the split, the method just ensures tax relief is only given at 20%.

Pennywise

It CAN make a difference to basic rate taxpayers as by reducing the amount of interest allowable as expense, it increases total taxable income, thus could push you over the h/r threshold. Then you get just basic rate relief on the interest further down the calculation as a deduction. Quite a nasty shock for people near the threshold. Also has the potential to impact other things too, once you've breached the threshold, i.e. reduction of the interest allowance to £500 and potentially pushing your taxable income over £50k to trigger the child benefit clawback tax charge., and also increasing your income liable to student loan repayments. Like I say, nasty!

Dazed_and_confused

but I will be basic rate for 18/19 in its entirely so interested to know if this tax year's 50/50 split applies to me of if I can off-set all my mortgage interest.

The new rules apply irrespective of someone's income tax rate.

But the new rules can have an impact on what your highest income tax rate will be so they could move you from being a basic rate payer to a higher rate payer.

The rules can also affect a variety of other things as outlined by Pennywise and others not previously mentioned such as reducing the amount of any Married Couple's Allowance due.

And as another poster ona different thread has discovered you cannot always benefit from the tax reduction from the remaining 25/50/75%, even when you have tax to pay overall.

semma19

Well what a load of b@lls. Guess what it'll make me do.. sell up as a landlord! And I'm a good one - charge very fair rent and have an excellent tenant. But I'm very threshold-y.