Tax Relief on BTL Mortgage Interest – Will It Last?

by Readers Question

15:49 PM, 25th February 2014
About 7 years ago

Tax Relief on BTL Mortgage Interest – Will It Last?

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Tax Relief on BTL Mortgage Interest – Will It Last?

Hi Folks,

I curently have one property and am advising my sister who has become an accidental landlord. My mum keeps sticking her oar in to the debate regarding speculation that tax relief on mortgage intertest will be reduced or withdrawn. I can find loads articles related to last years budget but the subject seems to have gone quiet for now.

I’m interested in a range of views from this forum and perhaps to share some speculation on what might happen under governments of different colours going forward. Tax Relief on BTL Mortgage Interest - Will It Last?

For what it’s worth It seems to me that:

  • removing that tax relief would decimate the BTL market and only benefit a small number of cash rich low/no gearing landlords.
  • the rest of us would get out of the market creating huge turmoil in the housing market
  • this would not generate a great deal in tax revenue. If I were Osborne I’d rather have 40% of something than 100% of nothing. This is not lkely to be in anyone’s interest.
  • I don’t buy the angle that BTL landlords are pushing prices up so that 1st time buyers are priced out in most parts of the country. In most cases we are meeting a short term demand.
  • the main reasons for rising house prices are falling household size (thereby increasing the demand for housing even in a stable population), population growth (primarily in London and South East, thus explaining at least part of the growing house price disparity) and an inelastic demand/supply relationship with new build.

I’d really welcome some views from you guys!

Andrew


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Comments

Mark Alexander

15:55 PM, 25th February 2014
About 7 years ago

Brilliant article Andrew, I totally agree.

I would add to this by saying that to increase demand to the point where property values are inflated where more development is viable to create demand there needs to be more tax incentives. This could include CGT roll-over on BTL property as well as allowing pensions to invest into certain forms of BTL property, e.g. licensed HMO's, student property, social hopusing etc. with planning or 106 covenants preventing the properties being used for owner occupation, perhaps also long term tenancies too.
.

Groover

16:04 PM, 25th February 2014
About 7 years ago

Reply to the comment left by "Mark Alexander" at "25/02/2014 - 15:55":

Thanks Mark - very helpful.

I'm rather more interested in what you and other readers think WILL happen than what you would LIKE to happen...

Any thoughts folks?

Richard Kent

16:12 PM, 25th February 2014
About 7 years ago

Reply to the comment left by "A G" at "25/02/2014 - 16:04":

Hi A G,

I could never see tax relief on mortgage interest being abolished.

If that were the case you would have to ask what would be cut next? Tax relief on non-mortgage loan interest, credit cards and financial charges etc.

A G, this won't happen.

Groover

16:18 PM, 25th February 2014
About 7 years ago

So why so much speculation about it?

Is it beacuse Osborne wanted to trail abolishion of MITR in advance of another punitive move to make the second punitive move more palettable? (if that makes sense?) i.e.suggesting something 'really very bad' (and not then doing it) makes introducing something just 'bad' seem actually really rather reasonable.

Perhaps I'm getting carried away...

Romain Garcin

16:18 PM, 25th February 2014
About 7 years ago

Interests on loans to fund a business are deductible as a general rule, as far as I understand.
Abolishing this only for BTL would therefore be a rather strong attack on the industry. It does not seem very realistic in my view, especially considering the housing situation.

Mark Alexander

16:22 PM, 25th February 2014
About 7 years ago

Reply to the comment left by "A G" at "25/02/2014 - 16:04":

I can't see this ever happening unless a socialist/communist UK government wanted to spark an immediate property crash due to panic selling with a view to virtually decimating the UK Private Rented Sector.

There is, of course, a (NOT) very silent minority of anti-landlord, loony lefties who pray for this form of PRS Armageddon but they are no better informed than any other blinkered, brainwashed, extremest group.
.

Richard Kent

16:24 PM, 25th February 2014
About 7 years ago

Reply to the comment left by "A G" at "25/02/2014 - 16:18":

A G,
Can you post some links to the information on which you're basing your questions?

-Paying tax as a landlord is good as it goes towards helping the disadvantaged of this world-

Groover

16:46 PM, 25th February 2014
About 7 years ago

Good idea Richard - See below:

http://www.telegraph.co.uk/finance/personalfinance/borrowing/10484798/Tax-threat-for-buy-to-let.html

Having re read the article i wuld appear Mark is right. It was a couple of think thanks that raised the matter and speculation followed. It hink part of the problem is that my mother reads the Daily Mail and then gets whipped into a frenzy by sensationalist reporting.

Thanks all for your time. I think my mother and sister will sleep more easily now...

AG

Richard Kent

16:52 PM, 25th February 2014
About 7 years ago

Reply to the comment left by "A G" at "25/02/2014 - 16:46":

Good advice -Don't read the Daily Mail - It's not good for your mind 🙂

Sure, I see the quote in the link.......

"The report, which won support from organisations representing tenants and young would-be home buyers, called for reliefs to be scaled back, claiming that “favourable” tax treatment of landlords “contributed to rising house prices and sharpened economic inequalities”. The biggest relief relates to mortgage interest, which landlords can deduct from rent before calculating the tax due."

It's an over simplistic picture put forward by ignorant groups.

They have omitted the CGT which landlords might have to face upon selling a property in addition to the many other financial and, more importantly, non-financial burdens a landlord faces.

It's these sort of half truths which are put forward by the 'gutter press'

Groover

16:58 PM, 25th February 2014
About 7 years ago

🙂

I gave up telling her that 20 years ago

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