Backlash After Osborne Unleashes Landlord-penalising Budget

Last week, the country held its breath as the first totally Conservative budget for 18 years was announced. For many in the property industry, George Osborne’s budget was a bit of a shock, with his policy penalising buy to let landlords. The Budget instead favoured homeowners, or would-be homeowners over renters and landlords, and has had experts speculating that rents will rise after the announcement that tax relief for landlords is to be slashed in the coming months. LDG, west end estate agent tells us more…

Under current tax laws a landlord is entitled to 40 or 45% tax relief on their mortgages; but, come April 2017, landlords will gradually see the rate slashed and by 2020 it will be down to only 20%. Those in the industry have warned that this move could be a step too far and could result in higher rents since landlords will have to pass on the extra costs to their tenants. What’s more, many believe that the new policy could lead to fewer properties available to rent as some landlords will choose to get out of the business altogether. The reduction in tax relief is expected to hit many of Britain’s hardworking savers who invested in property to aid their retirement, and the already squeezed middle classes may opt to bow out of the rental market en masse.

Backlash After Osborne Unleashes Landlord-penalising Budget

Research conducted by professional services network PWC shows that landlords could expect to start losing money when the Bank of England raises the base rate, something that analysts expect to happen in the second quarter of next year. Once this happens, those with properties worth £100,000 or more with an 85% loan to value mortgage and a 5% interest rate, can expect to lose around £100 per year. This will rise to £440 when the rate rises again to 5.5% and should it hit 6% average loses will be around £780.

But it’s not just in this area of tax relief that landlords are likely to feel some pain. From April 2016 landlords will no longer be able to claim 10% of the rent against wear and tear costs meaning that deductions can only made against damage to the property that has actually incurred. The government has made claims that these new changes to the buy to let market will only really affect one in five landlords; however, many experts disagree. What’s more, since buy to let is a business not an investment, those experts believe that the finance costs should not be taxed.

There was some good news for those who want to rent out a room. The chancellor announced a tax break for those who wish to take in a lodger allowing them up to £7,500 a year without having to pay any tax. The change, which will come into force next April almost doubles the current rent a room limit of £4,250.