From today, 6 April, individual landlords, general partnerships and limited liability partnerships will no longer be able to claim finance costs as a deduction from rental income to calculate the taxable rental profit.
It will be replaced with a basic rate tax reduction from the individual’s/partner’s income tax liability.
John Eastgate, sales and marketing director of OneSavings Bank, said: “Since the changes were announced in the 2015 Budget, we’ve already seen many landlords take action to mitigate the impact of the tax changes by becoming limited companies, or transferring ownership of properties to a spouse or partner in a lower tax band.
“Worryingly, one in six landlords do not understand the financial implications of the changes and will be in for a nasty shock when they find that they can no longer deduct all finance costs from rental income at the end of the 2017/18 tax year.
“Indeed, as financing buy-to-let becomes more specialised and complex, I cannot emphasise enough to landlords, who are considering incorporation, the importance of seeking professional advice as it may not be suitable for everyone.”