The Chancellor’s failure to add any further or amend any existing tax reforms will only serve to have far-reaching consequences for the buy-to-let market, according to one industry peer.
Plans to remove landlords of mortgage interest tax relief will have a ‘detrimental impact’ on households throughout the country, according to David Hannah, principal consultant of Cornerstone Tax.
From April, landlords, will begin to lose the right to deduct their entire mortgage interest costs at the rate they pay income tax, which is currently up to 45%. When the changes are fully implemented by 2020, the maximum will be 20%.
Mr Hannah has criticised the move, claiming it will only result in higher rents for tenants across the UK.
In response to yesterday’s Budget, Hannah said: ‘With real estate representing 21% of the UK economy, it is a mystery as to why the Government persists in hindering a crucial sector, by creating an unnecessary burden on tenants, landlords and homeowners.’
He describes the changes to mortgage interest tax relief and the 3% additional Stamp Duty as a ‘double-blow effect wiping out the buy-to-let economy.’ He feels that this, ‘doesn’t chime with the current socio-economic needs of the UK.’
Continuing, Mr Hannah observed: ‘The demand for rental accommodation is set to rise by one million households in the next five years-a combination of restricted access to mortgage finance, unaffordability created through eye-watering SDLT rates and a shift in labour market trends towards a more mobile workforce.’
‘Yet the government continues to breakdown the very sector that has absorbed change and provided homes for those who simply either cannot afford or do not wish to commit to homeownership. With the sector currently in its fourth consecutive quarter of decline, paired with a fall in homeownership rates, we are fast approaching a new type of housing crisis.’
Moving forwards, Mr Hannah wants to see the Government stop, ‘their obsession with homeownership’ and to, ‘think carefully’ about what the country needs.
He wants to see, ‘an accessible, flexible and affordable housing supply’ and feels, ‘the private rental sector, where buy-to-let landlords are a major contributor, provides just that.’