As predicted, Government shines light on buy-to-let to tackle housing crisis.
Prior to the Election in May 2015, Michael Riley, Director of Capital & Coastal, correctly predicted that despite which party came into power, it would only be a matter of time before the new Government “shone a light” on the buy-to-let industry as a way of tackling the lack of stock driving the country’s housing crisis. Today, George Osborne has cut mortgage interest relief on buy-to-let homes in an effort to create a “level playing field” between prospective landlords and those buying their homes to live in. Michael Riley comments on this potentially industry changing tax-relief crackdown.
“The biggest concern for landlords is that the government has now realised that it’s not healthy for the housing market to have multiple properties owned by individuals. Making multiple ownership less attractive by abolishing tax relief on buy-to-let mortgages will have a significant impact on the industry over the next five years as I believe today’s announcement is only the thin end of the wedge.
Limiting tax relief to those who fall into the basic 20 per cent income tax rate could force some landlords, particularly those with large loans, to sell up, and I think the London market, where property values are greatest, is likely to be most hit by the change. Suddenly a landlord with a £1000 interest payment has to find an extra £200 per month.
Some landlords may opt to increase rents but they will never be able to do so enough to cover the shortfall and tenants simply won’t pay it. Some may try to shelter themselves against it by putting their buy-to-lets within companies but if they have a residential or buy-to-let mortgage they won’t be able to do that. I think there will also be a reduction in the number of people planning buy-to-let investment to fund their retirement.
Now that the wheels are in motion, it’s possible over the next 3-4 years, landlords will have to pay tax on all income derived from buy-to-let.”
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Breaking Property News 28/1/26
