Treasury Defends Tax Hike for Landlords After Petition Protest

Protestors campaigning against a tax hike for landlords have forced the government to defend the policy. 

A petition started by property investor Mark Homer gathered 14,000 supporters - enough to force the government to make a written response to the protest. 

Homer was complaining about scrapping mortgage interest relief for landlords who pay income tax at the higher rate - 40% or more. 

The legislation means all private landlords will pay tax on buy-to-let or house in multiple occupation profits will pick up tax relief of 20% instead of their higher rate. The reduction in relief is being phased in over three years and will reach 20% in 2020-21.

“The government introduced changes to finance cost relief as part of a package of measures at Summer Budget 2015 to help reduce the deficit and rebalance the economy,” said the response from The Treasury. 

“By restricting landlords’ finance cost relief to the basic rate of income tax we are helping to reduce the advantage landlords may have over home owners in the property market. 

“Income tax relief for finance costs is not available to ordinary home buyers. 

“Previously, landlords could get relief on their finance costs at their marginal rate of income tax. 

“By restricting finance cost relief to the basic rate, all individual landlords will receive the same rate of income tax relief on their finance costs. 

“Landlords can still claim income tax relief at their marginal rate of tax on day-to-day running costs incurred in letting out a property, such as letting agent fees and replacing furniture. 

“Finance costs are different to other expenses, as having a mortgage allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would have done without it. 

“Using actual self-assessment data, HMRC estimate that only one in five landlords will pay more tax on their property income because of this measure.”