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Tax Relief

Tuesday, 13th October, 2015

Chancellor George Osborne announced in his Summer Budget that tax relief for buy-to-let landlords in the 40% and 45% tax brackets will be steadily reduced from 2017.

Currently, individual landlords can deduct their costs - including mortgage interest - from their profits before they pay tax. Wealthier landlords receive tax relief at 40% and 45%. This tax relief will be restricted to 20% for all individuals by April 2020.

Commenting on the changes, Paul Smee, director general of the Council of Mortgage Lenders, said: "The phasing is important. We will need to understand whether this will have a behavioural impact on higher rate buy-to-let landlords, but a four year timetable does at least reduce the risk of sudden market shocks."

Andy Knee, chief executive of LMS, added: "Of course, landlords can reduce the impact of the Chancellor's tax changes by ensuring they have the most competitive mortgage deal on each and every product in their portfolio. This could lead to significant remortgage opportunities for landlords, brokers and lenders alike."

In addition, from April 2016, the "wear and tear allowance", which allows landlords to reduce the tax they pay, will also be replaced by a new system that only allows them to get tax relief when they replace furnishings.  





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