Buy-to-let landlords in the UK will still benefit from around £16.7 billion in tax relief following the Government’s ongoing restriction to the system, which will be fully implemented by 2020, according to analysis by ludlowthompson, a London estate agent.
The tax relief allows buy-to-let landlords to offset expenses such as mortgage interest and other finance costs against their rental income.
However, the amount that landlords can offset is being restricted gradually to the basic rate of Income Tax over a four-year period. We have a handy guide to help you understand the changes: https://landlordnews.co.uk/government-guide-tax-relief-changes-residential-landlords/
The Treasury expects the amount of taxes collected from landlords to increase by £840m a year by 2020-21, when the changes will be in place.
Data provided by the Government to ludlowthompson shows that landlords claimed £17.5 billion in property expenses over the past year. They claimed more than £7 billion on mortgage interest and other finance costs, while £3.7 billion was claimed for property repairs and maintenance.
After the planned changes to tax relief are fully implemented, landlords will still be able to claim around £6.4 billion on interest costs alone.
Stephen Ludlow, the Chairman of ludlowthompson, comments: “Despite tightening, buy-to-let tax breaks are still very valuable, highlighting that rental property remains a highly attractive investment vehicle.
“Those tax breaks are essential to ensure that landlords continue to invest in maintaining their properties. If the tax breaks are reduced further, then landlords will cut their investment in the properties they own – reducing the standard of UK rental accommodation.”
The agent says that ensuring landlords continue to invest in providing good quality accommodation should continue to be the main priority for policymakers. This is especially important in locations such as London, where demand continues to outstrip supply.
Ludlow concludes: “Labour mobility continues to be central to economic strength. However, if cities like London are to remain a magnet for homegrown and international talent, sustaining a vibrant, high quality rental market is essential. To do that, the system has to work well for both tenants and landlords.”
We encourage all landlords to seek financial advice if they believe they’ll be affected by the Government’s tax relief changes.