In the 2015 Budget, the UK Government announced changes to the rules for mortgage interest tax relief for property investors.
Landlords that owned property personally could offset 100% of their mortgage interest against the rental income to reduce their profit and tax. Unfortunately, the changes came into effect during 2017 and from 2020 landlords can no longer deduct any mortgage interest.
This has been replaced by a new relief called ‘tax credit‘ which came into effect from April 2020. The main difference is now you declare your rental income without using the mortgage interest to reduce it first. Thus your gross personal income is quite a bit higher than before.
These Section 24 changes only applied to landlords who owned a buy to let property in their own name. A qualifying furnished holiday let is excluded, as are properties owned within a company.
Since Section 24, many property owners have begun using SPV’s or Special Purpose Vehicles to effectively ‘hold’ their properties in a more tax efficient manner. Lenders have responded to this by expanding their lending criteria so that applications from an SPV can now been accepted for buy to let, holiday let, HMO’s, bridging loans and commercial mortgages.
