Boost for first-time buyers as buy-to-let landlords’ profits are slashed in crackdown on mortgage interest tax relief. Thousands of buy-to-let landlords will see their earnings hit after George Osborne cracked down on mortgage interest tax relief in his summer Budget. These were the headlines but the reality is a bit different.
Whilst the proposals are a welcome start to end the unfair tax relief enjoyed by buy to let landlords, nothing is going to change any time soon. The Mañana Chancellor ,George Osborne hits buy to let landlords in his latest Budget – but not until April 2017 and even then the measure will be phased in over four years! This is to give landlords time to “sort out their affairs.” More likely, it will enable many UK landlords to side-step the new measure by choosing to own properties through corporate structures to continue to benefit from relief on mortgage interest payments with lower corporation tax, cut to 18% by 2020, another incentive according to mortgage brokers.
In the budget, tax relief for landlords on mortgage interest payments is to fall and they will only be able to claim the basic rate 20% tax relief on mortgage interest payments rather than 45%, or their highest rate. The Chancellor said the move will “level the playing field for homebuyers and investors”. The current tax break for landlords is estimated to cost the Treasury £6.3billion every year a Freedom of Information request revealed.