What to Do About The Mortgage Interest Tax Relief Changes

Unfortunately Landlords with mortgages have fallen out of favour with the Government and the new rules stand to have a major impact on property investors and rental yields. If you are affected by the changes to mortgage interest tax relief then although your options to overcome the affects are limited there may be some things you can do to reduce the impact on you.

  1. Move around lenders more and take out short term fixed rate low interest rate mortgage deals, although this in itself may carry additional costs associated with switching mortgage deals early or of using a mortgage broker.
  2. Sell a property to reduce overall rental income of your portfolio which is not ideal if you are looking for capital appreciation and plan to hold your investment property for a long length of time.
  3. Set up a Limited Company so you pay corporation tax, currently 20% and avoid falling into higher rate of income tax 40%.  However, you should seek advice and be careful since moving a property you own into a Limited Company can be considered a sale for Capital Gains Tax purposes, as well as restrict your borrowing options.
  4. Move a property to your spouse if they pay a lower rate of tax, just be careful they don’t find themselves a higher rate like in our example above.

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Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.