Back Arrow Back to Articles

A Guide To Tax Relief & Buy To Let Investing

Financial Performance

As of April last year, the UK Government introduced changes to the taxation of buy to let investments, essentially reducing the amount of mortgage interest landlords can offset against rental profits by 25% each year until April 2020, when the amount will be zero.

Instead, landlords will then receive a new 20% tax credit for mortgage interest. Put simply, this means all of the rental income a landlord earns will be taxable but they will be able to cut their final tax bill by 20% of their interest.

This naturally marks a big departure for buy to let landlords who had long benefitted from only paying tax on their net rental income. However, there are still multiple strategies available to investors looking to maximise returns on their investment in this new property playing field:

£Billions of tax relief before 2020

Firstly, there are still reliefs to be taken advantage of before the 2020 deadline, which will allow landlords to offset rental income expenses not only in the form of mortgage interest but other associated financial costs such as property repairs, various legal and management fees and rates, insurance and ground rents. Indeed, recent research indicates buy to let investors are still eligible to receive as much as £16.7bn worth of tax relief before the 2020 deadline, and £6.4 billion on interest rate costs alone after this date.

Post 2020 tax relief deadline

Assiduous cost management is part and parcel of running any successful property portfolio and enables landlords to make swift decisions to protect their investments. Once the tax relief deadline passes in 2020, there are a number of options landlords may want to consider in order to offset costs and ensure their investment remains profitable.

Rental costs

Passing the extra costs on to tenants in the form of rent rises is a further option to consider, though this won’t be appropriate for all, especially in areas where there is considerable competing inventory on the market and landlords will be mindful of not wanting to price themselves out of the market.

Limited Company structure

A further option is to place your property into a limited company structure, meaning you would then only be liable for corporation tax as opposed to the income tax on profits. One drawback with this relates to reduced mortgage options as typically, fewer providers will lend to a company. What’s more, mortgage rates for businesses are more expensive than for private landlords, so it’s important to be aware of all the associated costs of going down this route before proceeding.

Transferring ownership

Finally, for investors with spouses who pay a lower rate of tax, there’s the option of transferring one or more properties to them. In order for this to be efficient, care of course needs to be taken to ensure this won’t take them into a higher tax band, thereby negating any obvious gains.

As with any investment decision, deciding how to proceed with this new regime looming will require careful thought and investors unsure of the full implications should always seek professional assistance to ensure their portfolios remain in the strongest health for the new decade and beyond.


Stay Ahead of the Property Market: Newsletter

Sign up today and be the first to get the latest property news, market insights and SevenCapital development updates delivered straight to your inbox, every month.

Explore Developments

2 Beds Available

Trinity House at Graven Hill
2 Bedroom Apartments

Prices From


Right Arrow

Birmingham’s Hottest Property

105 Broad Street
Birmingham City Centre
1 & 2 Bedroom Apartments

Prices From


Right Arrow


New Eton House
1 & 2 Bedroom Apartments

Prices From


Right Arrow


St Martin’s Place
Birmingham City Centre
1 & 2 Bedroom Apartments, Luxury Penthouses

Prices From


Right Arrow