Change to taxation of Landlords

Example
Additional Rate – Alex’s Current Position
Consider a landlord, Alex, paying tax at
the additional rates (i.e. 45%) owning a
highly leveraged portfolio, receiving
£200,000 per year in rent and paying
£150,000 a year on an interest-only
mortgage:
Here, even though Alex’s portfolio is
highly leveraged, it continues to be
profitable, in part due to tax relief
ensuring that any amount spent on
finance costs is fully deductible against
his rental income subject to taxation.
Rent:
Mortgage:
Tax Liability* at 45%:
Rental Profits:
£ 200,000
£(150,000)
£ (22,500)
£ 27,500
* The tax relief on mortgage interest
payments reduces the amount of rent
subject to tax to £50,000 (i.e. rent of
£200,000 minus £150,000 mortgage
interest payments), which in this example
is subject to tax at 45%.