How does the reduction in tax relief for mortgage interest on property affect Child Tax Credit claims?

Question

As per Revenue Benefits:

Changes to the tax system for landlords of residential properties mean that from 6 April 2017 tax relief for finance costs such as mortgage interest will be restricted to the basic rate of Income Tax. This was phased in gradually over four years.

Now the rules are fully in place, instead of deducting finance costs as an allowable expense when working out property income profit/loss, there is a tax reduction which, for most low income people will mean they will receive basic rate tax relief on the finance costs as the reduction.

How does the reduction in tax relief for mortgage interest on property affect Child Tax Credit claims by those with this kind of property investment?

Answer 1

As per Revenue Benefits:

However, tax credit claimants are protected from the unintended consequences that flow from the new rules so that, in calculating property income, the restrictions in section 272A of ITTOIA (restricting deductions for finance costs related to residential property) and section 399A of ITA (property partnerships: restriction of relief for investment loan interest) are disregarded. This is explained in HMRC’s tax credit technical manual (TCTM 04006).