Example: Mortgage Interest Tax Relief from April 2020
You are a higher rate taxpayer and make a rental profit of £1,000 per month before accounting for £500 per month rental related interest on mortgage borrowings.
Rental profit made is £12,000 x 40% = £4,800
Mortgage interest paid £6,000 x 20% = £1,200
Tax due to HMRC - £3,600
Under the old rules your rental profit would have been £6,000 (£12,000-£6,000). The tax due on this would have been £2,400.
Therefore, as a higher rate taxpayer you are now liable to an additional £1,200 tax from some 4 years ago. Basic rate taxpayers are not affected by the changes.