Changes to tax relief for landlords could push them into higher rates

The changes to the tax rules for residential property that come into force next April may result in landlords paying higher rates of income tax warns Blick Rothenberg. Child benefit personal allowances and pensions reliefs may also be affected.

The changes were announced in last year’s summer Budget and HMRC has now issued guidance on how the reduction is calculated.

The measure will restrict the interest a residential landlord can deduct to calculate their income tax liability. The restriction is being phased in over four years – interest is restricted by 25% in each year – until it takes full effect in April 2020.

HMRC’s guidance on the changes includes worked examples to illustrate how landlords will be affected. Nimesh Shah partner at Blick Rothenberg said: ‘HMRC says that “all residential landlords with finance costs will be affected but only some will pay more...