Landlords face more taxation changes as of the 6th of April 2020. With the phasing out of mortgage interest tax relief reaching its final stage and capital gains tax adjustments:

The start of the new tax year has seen mortgage interest tax relief scaled back even further, while landlords who sell a property also now have less time in which to pay capital gains tax!

People who previously lived in a property that they later rented out have also seen a few changes made to the tax reliefs they can claim.

The changes to mortgage interest tax relief, which were well flagged in advance, have been blamed for many landlords exiting the sector in the past couple of years. 

Mortgage Interest Tax Relief

The government has been in the process of tapering down mortgage interest tax relief since 2017 and gradually replacing it with a new system.

Before April 2017, landlords could claim mortgage interest tax relief on 100% of their mortgage interest costs. The amount they could claim was gradually reduced to 25% last year.

But under the new system, which comes into force on 6 April 2020, the relief has been phased out completely and replaced with a 20% tax credit for mortgage interest.

Changes to mortgage interest tax relief will affect around 55% of landlords who have one or more buy-to-let mortgages. 

However, industry bodies have said the changes have caused some landlords to stop expanding their portfolios or even sell some of their properties. 

Capital Gains Tax

From 6 April 2020, HMRC proposes to reduce this final period of exemption to nine months. However, if you are moving into a care home or have a disability, you will still be able to claim private residence relief for the last 36 months of ownership. 

These changes seek to raise extra revenue from the disposal of residential properties and to collect these taxes more quickly.

For many of the 1.2 million residential property disposals each year, there will be no liability having been occupied throughout the period of ownership as the owner’s main residence.

If, however, you have a property which was once your main residence and you either let it out or have retained it for other reasons, these changes will affect you.

Working away, divorce or separation and other common issues could also see your entitlement to full private residence relief affected, meaning some of the rule changes could impact you.

If any of the above applies to you, these changes are likely to result in you having to pay significantly more capital gains tax if you sell or transfer these properties on or after 6 April 2020.