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Landlord tax relief

Landlord tax relief 1024 576 NGI Residential Mortgages

In April 2017 the Government introduced a change to tax relief on residential properties for landlords. Over the 5-years since its introduction that tax relief has gradually been decreased and in 6th April 2020 it will be restricted to a level where the relief is the same as the basic rate of tax.

The following table provides an accurate summary of the changes:

YEAR EXISTING METHOD NEW METHOD
2016-17 100% 0%
2017-18 75% 25%
2018-19 50% 50%
2019-20 25% 75%
2020-21 0% 100%

In essence these changes basically mean that tax relief is given as a reduction in tax liability, rather than a reduction of taxable income. Therefore, a property landlord has to declare the rental income they generate, then they will have to pay tax on the full amount of this income and then claim 20% of this back as a credit. Of course, the 20% will rise to 45% for individuals who are earning income associated with a higher tax band.

The government has put these landlord tax relief changes in place in the hope that it will prevent higher earning landlords from receiving the biggest proportion of income tax relief. For more information on the changes go to https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies.