Investment in Residential Property

Investment in residential property is a popular way to save for retirement or build up a property portfolio as usually property appreciates in value which is what we all hope.

Tax will be payable on the rental income received from the rental of residential property after deducting allowable expenses. Allowable expenses include mortgage interest, which is now fully restricted in the case of residential property, repairs, agent’s letting fees and the cost of replacing furnishings.

Tax relief on finance costs for mortgages on residential properties let out to tenants has been changing for the last few years and the relief has now been restricted to the basic rate of income tax.

What this means in principle is that with this phasing in from April 2017 to April 2021, none of the finance costs are deductible from the rental income as an allowable expenses but rather, relief is given as a basic rate reduction. This reduction could be subject to further restrictions.

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