So this starts coming in from April and is being introduced in staggered stages, with 75% finance costs being allowed then 50% then 25% then 0% in coming years. But what exactly does 'allowed' mean in this context? I've seen it discussed that the system is moving to a "basic rate reduction" but that doesn't mean much to me.
Anyone got a link to a good, clear explanation, or able to provide one? Is it as simple as "you pay tax on what you bring in regardless of your costs" or is there more to it than that? Because that could lead to a situation you make a loss but still get taxed in extreme cases (rental £500pcm, mortgage interest £550pcm) or certainly where the tax leaves you making a loss (rental £600pcm, mortgage interest £550pcm, tax on £600 is more than £50).
I can see this sort of approach deters cash-poor investors buying BTLs on credit
edit: surely it's been fully discussed here but I'm not sure what to search for. If anyone recalls a thread just post a link
Anyone got a link to a good, clear explanation, or able to provide one? Is it as simple as "you pay tax on what you bring in regardless of your costs" or is there more to it than that? Because that could lead to a situation you make a loss but still get taxed in extreme cases (rental £500pcm, mortgage interest £550pcm) or certainly where the tax leaves you making a loss (rental £600pcm, mortgage interest £550pcm, tax on £600 is more than £50).
I can see this sort of approach deters cash-poor investors buying BTLs on credit
edit: surely it's been fully discussed here but I'm not sure what to search for. If anyone recalls a thread just post a link
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