Mortgage interest tax relief, also known as the mortgage interest deduction, is a tax relief that applies to individuals who own a home and pay mortgage interest on their home loan in the UK. The relief reduces the amount of income tax paid by homeowners by allowing them to deduct their mortgage interest payments from their taxable income.

Previously, mortgage interest tax relief was available to all homeowners who had a mortgage on their primary residence. However, since April 2017, the relief has been gradually phased out for higher rate taxpayers, and replaced with a new tax credit known as the Mortgage Interest Relief for Landlords.

Under the new rules, the amount of mortgage interest that can be deducted from taxable income is reduced for higher rate taxpayers. For the tax year 2021/22, only basic rate taxpayers can claim full mortgage interest tax relief, while higher rate taxpayers can only claim relief at the basic rate of 20%.

For landlords, the Mortgage Interest Relief for Landlords applies to individuals who receive rental income from residential property. The relief allows landlords to deduct 20% of their mortgage interest payments from their rental income before calculating their tax liability.

Overall, the rules around mortgage interest tax relief can be complex and it is important for homeowners and landlords to understand their eligibility and the impact on their tax liability. Seeking professional advice from a tax advisor or accountant can be helpful in navigating these rules and ensuring that tax obligations are met.