Mixed News on Buy To Let
The Chancellor has announced that interest relief on buy to let mortgages will be restricted. Only basic rate tax relief (20%) will be available on finance costs incurred on borrowings to purchase buy to let residential properties.
This will include mortgage interest, interest on loans to buy furnishings for the property and loan arrangement fees. The change will be gradually phased in from 6 April 2017. Initially, the basic rate relief restriction will apply to only 25% of finance costs but by 6 April 2020 all finance costs will be subject to the restriction.
Better news is that the government will be looking at a better way of giving tax relief on the costs of replacing furnishings. This will replace the 10% wear and tear allowance. Details will be published later in the year, and the new system will start in April 2016.
Rent a Room Relief will be increased to £7,500 from April 2016. This is the tax free amount that can be received from renting out a room in your own home.