A petition urging the reversal of the controversial Section 24 tax changes for landlords has received a written response from the government after reaching some 28,000 signatures.
Simon Foster’s e-petition now needs to reach 100,000 signatures to win a debate in parliament. The Midlands-based property investor wants the government to reinstate the ability of landlords to set the full amount of mortgage interest against rental income before tax is calculated. Announced by George Osborne in 2015, the tax relief was replaced by a basic rate reduction from their income tax liability for their finance costs of 20%.
Foster explains that as a small, well-established private landlord, he is now struggling to make any money from letting properties. “Unless the ability to offset mortgage interest against rental income is reinstated, I will – like many – be forced to sell my properties,” he adds. “This could reduce the number of properties available on the private rental market.”
HM Treasury response
HM Treasury has now added its response to his points. It says: “The Government recognises that the private rented sector plays an important role in the UK housing market and economy.
“However, the Government also has a responsibility to make sure that the income tax system is fair. Under the old system, residential landlords got relief on their finance costs (including mortgage interest payments) at their marginal rate of income tax, which meant that higher rate taxpayers got a more generous tax relief than those on lower incomes.
“To address this, and make sure that all residential landlords are treated the same by the income tax system, the Government phased in a set of reforms to restrict finance cost relief to the equivalent of the basic rate of income tax.
“The reforms mean that all residential landlords will now receive the same amount of relief. It also reduces the disparity in income tax treatment between homeowners and landlords.
“To be clear, these reforms do not mean that tax relief on mortgage interest has been abolished. Landlords are still able to claim an income tax reduction equivalent to basic rate tax relief on the finance costs of their rental property. Residential landlords also continue to be able to claim relief at their marginal rate of income tax on the day-to-day costs incurred in letting out a property, such as letting agent fees and replacing furniture.”
Readers can sign the petition here.
