Tax changes for landlords

Ronzl Accountants

1st March 2020

Money Matters

Ronzl Accountants

By Ola Sulaimon

Ronzl Accountants

EVERY tax year, there are usually one or two changes to the tax rules relating to landlords in the UK.

In 2016/17, there was a major change put in place to the way landlords claimed tax relief on finance cost.

These changes were implemented in April 2017/18 and it was phased over four tax years, including tax year 2020/21.

The finance tax is gradually reducing and so far, it has reduced by 25 per cent and by 2020/21 it will be totally disallowed.

The major changes introduced in 2016/17

The changes affect the interest on borrowings made by the landlords for the property.

The normal practice was to deduct the full amount of the interest and to reduce the net rental income and paying lower tax.

Examples of borrowing could include loans to buy or improve, renovate the properties.

It could also be loans to buy assets used in the property business.

The changes disallow these expenses from the rental account.

Then the expense would then be used as a tax reducer whilst compiling the returns.

The tax reducer would be at the basic rate (20 per cent), thereby it doesn't give any effect on basic taxpayers as stated above.

The following are examples of how the landlords can be affected by these changes:

1. Residential landlords that are individuals or in a partnership but not companies.

2. These landlords would have incurred finance costs relating to their properties which have been let out.

3. Individuals that run furnished holiday letting are exempted because they are treated as running a business.

4. These tax changes were made to affect landlords that pay tax at 40 to 45 per cent, so invariably landlords that let properties and pay tax at 20 per cent are not affected on the long run.

To find out more contact Ronzl Accountants Ltd, 51 Billing Road, Northampton. Call 01604 965826 or see the website at

Ronzl Accountants