Buy-to-let tax reliefs set to exceed £15 billion despite changes

UK Landlords will still be able to claim £15 billion in tax reliefs and property expenses, even after the recently announced Government reductions are introduced.

George Osborne announced that, from 2017, the mortgage interest relief on rental properties will gradually be restricted. Tax will be applied to gross rental income rather than net rental income. While any taxpayer will be able to reclaim 20% of tax relief against mortgage interest, those in higher income tax bands will face reductions, in the coming years, for the amount paid over the threshold in relief. Those taxpayers in the higher rate bands will have their relief tapered each year with reductions from the current 45% available to the 20% received by all taxpayers, until April 2020 when they will no longer receive any higher rate deduction on their mortgage interest.

After these planned changes are introduced in 2018-19, landlords will still have access to approximately £6.3 billion alone for relief on interest rate payments.

As of April 2016, the wear and tear allowance will only be liable on new furnishings that have been purchased, as opposed to the previous system where up to 10% of the rental income was available to be claimed.

Stephen Ludlow, Chairman at ludlowthompson, comments: “Despite a lot of media attention surrounding the Government reductions to tax reliefs, buy-to-let is still an attractive investment with substantial tax breaks.

“Landlords can still claim tax relief for many costs incurred in buy-to-let, from general maintenance to any professional fees involved.

“When recent changes to buy-to-let tax reliefs are taken into account over the entire lifetime of what is normally a long-term investment, they will have a minimal impact on an investor’s return.”

“Tax reliefs ensure landlords can maintain the high quality of their rental property. Just as importantly, the buy-to-let market plays a vital role in the economy by upgrading the ensuring the existing housing stock remains high and tenants have access to a wide pool of affordable, flexible rental accommodation, thereby ensuring labour mobility.”