This change marks a seismic shift in tax relief for buy-to-let landlords and will leave many facing far larger tax bills than was previously the case. The reduction in the relief for finance costs for landlords will be phased in over four years from April 2017.
Deductions from property income will be restricted to:
75% for 2017 to 2018
50% for 2018 to 2019
25% for 2019 to 2020
0% for 2020 to 2021 and beyond
The new rules apply to:
UK resident individuals that let residential properties in the UK or overseas,
Non-UK resident individuals that let residential properties in the UK,
Individuals who let such properties in partnership and
Trustees or beneficiaries of trusts liable for Income Tax on the property profits.
Landlords of furnished holiday lettings, UK resident companies and non-UK resident companies are not affected by the changes.