Buy to Let Mortgage Interest Tax Changes Affect Rental Cover

Published / Last Updated on 07/03/2018

What effect has the buy to let mortgage interest tax changes on expenses for tax payers affected rental cover buy to let mortgages?

The amount of Income Tax relief some landlords can get on residential property finance costs started to be restricted (in part) to a basic rate tax credit from 6 April 2017.  This is being gradually phased in from April 2017 through to April 2020.

  • 2017 to 2018 - 75% against full income tax rate and 25% restricted to basic rate tax credit
  • 2018 to 2019 - 50% against full income tax rate and 50% restricted to basic rate tax credit
  • 2019 to 2020 - 25% against full income tax rate and 75% restricted to basic rate tax credit
  • 2020 to 2021 - 0% against full income tax rate and 100% restricted to basic rate tax credit

Impact on Rental Cover Requirements
Many Buy to Let Mortages now require rental cover (i.e. rent to be a % of the mortgage % to cover to loan) of

  • Basic Rate Tax Payers 125% rental cover
  • High Rate Tax Payers 145% rental cover


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