In the July budget the Chancellor George Osborne announced several changes to the amount of tax relief landlords can claim on their buy-to-let interest mortgage, including the right to automatically claim 10% of the rent against wear and tear.
Currently a landlord can claim tax reliefs worth 40% and 45% of the interest payments on their buy-to-let mortgages. However as from April 2017, landlords will no longer be able to claim this, instead the maximum relief will be set at 20%, although these changes will be introduced over a four-year period.
As from 2016 landlords will have to provide receipts for money they have spent on wear and tear in order to have this deducted from their tax bill. Phil Nicklin, from Deloitte, said: 'This measure will almost double the effective cost of borrowing for a taxpayer on the highest rate of tax. 'Currently interest payments of £100 only cost £55 after tax relief, but will cost £80 from 2020.'
In the budget document, it states: 'The current tax system supports landlords over and above ordinary homeowners. Landlords can deduct costs they incur when calculating the tax they pay on their rental income. A large portion of those costs are interest payments on the mortgage. 'Mortgage Interest Relief was withdrawn from homeowners 15 years ago. However, landlords still receive the relief. George Osborne said he wanted to support homeownership but 'act in a proportionate and gradual way.'