Mortgage Interest Relief

Mortgage Interest Relief refers to mortgage interest costs that are deductible from income tax to reduce overall tax liability. Once upon a time, the UK offered Mortgage Interest Relief At Source (MIRAS), enabling homeowners to deduct interest on loans up to £30,000. That ended in April 2000. Since then, mortgage interest relief has been reserved for landlords and specific business-related uses.

Who Can Still Claim Mortgage Interest Relief?

If you’re a landlord, you can still claim relief - but not as a deduction. Since April 2020, mortgage interest is no longer deductible from rental income. Instead, you receive a 20% tax credit on the interest paid. This applies only to individuals renting out residential property. Limited companies are exempt from this restriction and can still deduct mortgage interest in full.

Exceptions for Homeowners

While you can’t claim relief on your main residence, there are narrow exceptions:

• Home office use: If you're self-employed and use part of your home exclusively for business, you may claim a portion of your mortgage interest as a business expense.
• Furnished holiday lets: These may qualify for relief if operated as a business.
• Rent-a-Room Scheme: You can earn up to £7,500 tax-free by renting out a furnished room in your main home.

Working From Home Tax Relief

If you're required to work from home by your employer (not by choice), you can claim £6 per week in tax relief for additional household costs like electricity. This equates to a potential annual saving of £62.40 for basic rate taxpayers.

Other Tax Benefits for Homeowners

Even without mortgage interest relief, UK homeowners still enjoy:

• Private Residence Relief: No Capital Gains Tax when selling your main home.
• Stamp Duty discounts: First-time buyers benefit from reduced rates.
• Business use deductions: If part of your home is used for business, some expenses may be deductible.

Maximising Your Tax Position

To make the most of current allowances:

• Keep detailed records if using your home for business.
• Review ownership structures - especially if married or in a civil partnership.
• Seek professional advice to navigate complex and evolving tax rules.

The Takeaway

Mortgage interest relief for main residences may be long gone, but savvy homeowners and landlords can still benefit from other tax strategies. Focus on what’s available today - not what’s been lost - and you’ll be better positioned to optimise your property finances.

This article is for informational purposes. Always seek professional advice before making any property and/or financial decisions.