Landlords are fighting back against mortgage interest relief cuts
Friday 22 April 2016
Thousands of smaller BTL investors - with mortgages on one or two properties bought as part of their pension plan - are being urged to join a campaign against cuts to mortgage interest relief.
At the moment there are sensible rules in place which allow landlords to offset all of their mortgage interest against tax.
But starting from next year these rules will be phased out, and by April 2020, once they have been withdrawn altogether, it is expected that higher-rate tax payers will only receive 50 per cent of the relief they currently get.
The move is part of a raft of complicated new arrangements targeting the BTL sector which were announced by Chancellor George Osborne in the 2015 summer Budget.
Cuts will hit small buy-to-let investors hardest
Critics say big companies and richer landlords with no mortgages will be left unscathed - but thousands of smaller BTL investors who pay interest to their lender will be taxed as if that cost didn’t exist.
Some will pay tax even when they make a loss.
It is estimated that if mortgage interest payments are around 75 per cent of the rent - after other costs have been deducted - a higher-rate taxpaying landlord will see their tax bill obliterate any profit from rent.
The potential consequences could be catastrophic for the BTL sector, with costs transferred to tenants, but some landlords have already started fighting back.
Campaigners hope to raise a further £250,000 to add to the £50,000 war chest they have already amassed in a bid to launch a judicial review against the restrictions.
Legal challenge to be headed-up by Cherie Blair QC
The legal challenge is being spearheaded by none other than Cherie Blair QC, with the backing of landlords Steve Bolton and Chris Cooper.
Mr Bolton, chair of Platinum Property Partners, has urged landlords to show solidarity and send a message to a ‘deluded’ and ‘out of touch’ political elite.
He told the Telegraph newspaper: “We need to unite to show that we will not accept the victimisation of landlords and tenants.”
And he warned that attempts to reclassify ‘mortgage interest’ as anything other than a ‘normal business expense’ will face strong opposition from landlords throughout the country.
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