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MP says 'mistakes' were made on landlord tax relief changes – could the government u-turn?

2-minute read

Sam Bromley

18 April 2019

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Former Conservative leader Iain Duncan Smith made the comments at the National Landlord Investor Show.

Iain Duncan Smith said that landlords who let their properties to tenants receiving local housing allowance or housing benefit provide a “vital” service.

He went on to say those landlords should be incentivised to stay in the market, prompting speculation that former Chancellor George Osborne’s 2015 changes could be reversed for landlords letting to social tenants.

Landlords hit by tax relief changes

Changes to mortgage interest tax relief are being phased in between 2017-2020. This means that in the 2019-20 tax year landlords can only deduct 25 per cent of mortgage interest against rental income when calculating profits. In 2020-21, this drops to zero per cent.

Another change George Osborne introduced was a three per cent stamp duty surcharge on buy-to-let properties.

But Mr Duncan Smith said that the government should consider excluding landlords who let to social tenants from the changes: “I personally think there have been some mistakes made. I really do think that we need to ensure we do keep the social rented sector running and with reasonable margins so that [landlords] stay in it…”

When pressed on whether this means making sure landlords who let to social housing tenants can keep mortgage interest tax relief, Mr Duncan Smith said that’s the “area we need to look at.”

Why exempt landlords who let to social tenants?

The social housing sector has become increasingly dependent on private landlords. This is Money reports that a 2017 Residential Landlords Association survey of nearly 3,000 private landlords showed that more than a fifth of the poorest ten per cent of households are now renting privately.

But tax relief changes have affected landlords’ profits up and down the country. And for landlords letting to people who get local housing allowance or housing benefit, a controversial Universal Credit system has led to tenants falling behind on their rent – all adding to the reluctance of landlords to stay in the market.

What could keep landlords in the market?

Mr Duncan Smith suggested that giving landlords incentives to keep letting to social tenants is a “social need”, saying the government should look at “what keeps people in the market.”

Reversing George Osborne’s tax relief changes for these landlords seems to be one option available. But if the government does consider reversing those changes, it remains to be seen whether it'll roll back the changes to the rest of the buy-to-let sector.

This is why it’s important to think about how the changes are affecting you – and to think about ways to reduce their effects, like using a corporate structure to buy rental properties.

What do you think of Iain Duncan Smith’s comments? Let us know below.

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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