How landlords can cope with Buy-to-let tax relief abatement
Harry November 25, 2022

Buying properties through a buy-to-let mortgage was advantageous for landlords previously. With the recent changes in the rule, no landlord can deduct any mortgage expenses from the rental income to reduce tax.

Instead, one will receive a tax credit basing 20% of the mortgage interest payments. It came as a shocker to the high-income taxpayers as it bowled over a 40% tax rebate on mortgage payments. And the topmost taxpayers can no longer exercise the 45% rebate on interest payments.

The government of the UK took the initiative owing to the rising house prices in the UK. The jump in house rates benefits the landlord the most. With no new house construction in the country, individuals search for a house to rent. It became a promising opportunity for landlords to amplify their wealth and boost the value of their property portfolio.

Why is it a Pressing Concern for Landlords?

With these changes, landlords with basic pay would tangibly see no difference. However, the high-paid landlords may suffer a 40% loss in mortgage payments rebate. The government halted the proposal for 3 years in 2017. It was finally launched in 2020, witnessing the domination of economic structure and a sudden hike in landlord income with income tax remaining intact.

New rules thwarted the plans of the landlord. Every landlord must declare the income they used to pay the mortgage on their tax return.

For example, 

Individuals with £150,000 as a buy-to-let property mortgage on a property worth £200,000 and a rental payment of £800 roughly earn a yearly profit of £2,160. Post new laws, the new profit falls to £960, in this case. 

The higher the interest one pays, the harsher the interest. You may benefit little from the change if you are on a long-term fixed mortgage.

The lower profit impacts the liabilities regarding cash loans on bad credit and monthly payments. With budget and income squeezed, landlords face the harshest time ensuring timely loan payments.

5 Tips to mitigate the after-effects of the loss

The mortgage rates for businesses are higher than the private landlords. It would cost you more than you could save in tax. If you wish to transfer the property owners in the business, it could cost you an extra expense towards stamp duty. Use the calculator to chalk out the total money you would have to pay to redeem the final benefits.

It is not a good idea if you consider upping the tenants' rent. No matter what you believe, most tenants would disagree with this. The reason is that they do not earn enough to support a higher rental agreement. Ditch the idea.

Here are some ways a landlord can mitigate the impact of the mortgage-interest tax lift. Check out:

  1. Switch to a short-term buy-to-let mortgage

If you switch to a short-term buy-to-let mortgage, the payments towards the loan would be high, but you can complete the loan payments quickly compared to the long-term. Meanwhile, avoid taking any cash loans on bad creditMonthly payments may become a deal for you in that case. You would have to ensure a regular price on the loan. Thus, unless necessary, do now switch to any cash loans until the tenure.

2)     Jump to a limited company Structure

Landlords should switch to the best and most authentic LLP (Limited Liability Partnership). The operating body pays the corporation tax. It could help you ensure relief from income tax on profits. And the amount you pay as a tax is significantly lower than the existing setup. However, one drawback is- the mortgage providers may need to hold it in high aspect. Precisely, your mortgage options will be fewer than the existing setup.

3)     Transfer some properties to your spouse

If you wish to wear away the effects, transfer some properties in your spouse's name. Suppose she is a professional and a taxpayer. It will help you reduce the tax burden and the overall taxable properties and amount. Check whether she is in the lower tax bracket or not. Because otherwise, it is not possible. The change impacts the high taxpayers the most than the lower ones. However, ensure to transfer limited properties, or else she may too enter the high-interest tax bracket.

4)     Reduce tax on rental income

An individual/ landlord pays more than one must on a property. Rental property owners can deduct the charges by minimizing their income. They can do this by removing maintenance charges and property-owning charges. Check out the other ways you can deduct the tax on the rental income.:


  • Identify the charge basing the facilities and rooms
  • Buy property under joint ownership.  It would help you reduce taxable income and mortgage repayments
  • Investing in the existing property improvement may help avoid heavy stamp taxes. By doing so, you can amplify the property space and income simultaneously.
  • Have a short-term tenant agreement in place. You can claim council tax benefits by doing so. Such a setup allows a landlord to optimize rent frequently.
  • Leverage all the possible tax bands that you and your spouse may qualify for. After deducting the tax benefits from your income, you can pay the tax efficiently.
  • Reduce the mortgage rates by switching to an offset buy-to-let mortgage. Landlords must have a document stating the interest paid for each year.
  • One of the most impactful ways to optimize the payments is by taking cash loans on bad credit and managing monthly payments without skipping. It would help you reduce the overall loan amount and interest rates.

Bottom line

Well, there is always a silver lining. If you are a landlord with a low income and tax bracket, you must not worry. Well, the affected ones may utilize the pension to invest in new buy-to-let properties. This provision opens up the opportunity for first-time property buyers to buy property outwardly instead of rentals. It is more affordable that way.