With rising property costs and low interest rates, many people took out a mortgage to invest in a buy-to-let property. As long as property prices continued to rise and the tenants paid their rent, investors could make money from the rising market while the rent from the tenant paid off the mortgage
The situation where a married couple or civil partners jointly own an investment property that they let out is a familiar one, but when it comes to the rental income, special rules apply.
The mechanism by which landlords receive tax relief for interest and other finance costs is changing from April 2017 … and not for the better. The current rules are more generous than the new rules in that they enable the landlord to receive tax relief at his or her marginal rate of tax.
Lettings relief increases the amount of the gain that is sheltered from capital gains tax when you sell a property which has at some time been your only or main residence, and in respect of which some private residence relief is due.
In his July 2015 Budget, the Chancellor dealt a blow to landlords with his announcement that from April 2017 relief for finance costs would be progressively restricted.
Until the end of the 2015/16 tax year, landlords letting furnished properties were able to claim an automatic deduction of 10% of net rents to cover the cost of replacing fixtures and fittings. The relief was only available in respect of furnished lettings and it was available regardless of whether any money was actually spent on replacing items.