A cut in the tax relief available for buy-to-let landlords could lead them to push up rents, it was claimed after this month’s budget.
The budget announced plans to reduce the amount of tax relief investors can claim on mortgage interest payments, in a move the chancellor said would level the playing field for homebuyers.
Chancellor for the Exchequer George Osborne said buy-to-let interest relief will be restricted to the basic tax rate, which currently stands at 20 per cent. The tax break cost the Treasury about 6.3 billion pounds ($9.7 billion) in the financial year ending in 2013, the Guardian newspaper reported.
The wealthiest landlords are getting 45 pence back from the taxpayer for every pound of mortgage interest costs they incur, the chancellor said. The reduction of the tax break will start in April 2017 and be phased in over four years, he said.
However, landlords say they may be forced to hike rents as a result of the changes. In an open letter to Mr Osborne, the National Landlords Association’s chief executive officer Richard Lambert said the move would damage the economy, and work against first-time buyers by putting greater pressure on the cost of housing.
UK landlords bought about 60 percent of London’s new homes last year and almost 20 per cent of all new mortgage lending in the first quarter went to buy-to-let investors.
Nicholas Leeming, chairman of national estate agents Jackson-Stops & Staff, said: “The changes in buy to let tax relief will hit many small and older private investors.
“This a major blow to a sector that is heavily reliant on private investors and who provide a crucial supply of property to the private rental sector.”