Landlord tax relief restricted in July 2015 Budget
The first fully Conservative budget in almost two decades has seen Chancellor George Osborne restrict mortgage interest relief for landlords – though not remove it entirely, as some predicted prior to the announcement.
The Daily Express suggested on Friday 26th June that Mr Osborne could stop landlords from offsetting their buy-to-let mortgage interest against their rental income when calculating tax. Figures apparently suggest that the total relief claimed in the 2012–13 financial year amounted to £6.3 billion 1.
Richard Lambert, CEO of the National Landlords Association (NLA), penned an open letter to the Chancellor on Friday 3rd July. In it, he urged Mr Osborne to retain the relief, stating that the majority of landlords operate with narrow margins and would be left with no choice but to increase rents if faced with higher tax bills.
The government has chosen not to scrap the relief entirely, however, instead restricting it to just the basic 20% rate of income tax. This means that wealthier landlords who pay tax at the 40% and 45% rates will have their tax relief reduced. Higher-rate relief will be phased out gradually over four years, starting in April 2017.
From April 2016, the wear and tear allowance will also be restricted so that landlords can only claim tax relief when they replace furnishings.
Other budget highlights
- ‘Rent-a-room’ allowance to rise to £7,500 per year
Investment and infrastructure
- £30 million infrastructure investment over three years for Transport for the North (TfN)
- £8 billion funding in real terms for the NHS by 2020
- Targeting full employment, with the goal of creating 2 million jobs over the coming five years
- Corporation tax to be reduced to 19% in 2017 and 18% in 2020
- A £175,000 ‘family home allowance’ to allow individuals to pass on their estate to a child or grandchild tax-free after death
- Abolishment of permanent non-dom status that allows non-domiciled individuals to avoid paying UK tax on their offshore income
- Extra funding to combat tax avoidance and non-compliance
Seek tax advice from a qualified professional.
- Requirement for those aged 18-21 to either be in work or full-time education, with no automatic entitlement to benefits
- Working benefits stripped from claimants who are not disabled and do not have children
- Four year freeze on working-age benefits (excluding maternity allowance and pay, paternity pay and sick pay)
- Requirement from 2017 for working parents of three- and four-year olds to work in order to be entitled to universal benefit (though they will benefit from 30 hours of free childcare per week)
- Higher-income social housing tenants to pay market rate rents
- Clements, L. “Summer Budget 2015: Could George Osborne axe landlord’s buy-to-let tax breaks?” Daily Express. 26 Jun 2015.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.