Landlords across the country will be worried about the impacts of today’s budget cuts announcement by the Chancellor of the Exchequer, after he declared he’s reducing the tax relief on private rented homes. In doing so, he hopes to control the economic risk posed by the booming buy-to-let market.
Quick Move Now recently reported that there are roughly 2 million private landlords in the UK who are responsible for renting out nearly 5 million properties. This means that 18% of households currently rent from a private landlord. This is a trend that was continuing to grow as first time buyers struggle to get on the property ladder and investors continuing to see property as a source of income and future profit.
Mr Osborne said the income tax relief enjoyed by landlords will be reduced to the basic rate of 20 per cent, currently it stands at 40 per cent. It is hoped the reduction will address the unfairness in property tax and will be phased in from 2017.
Currently buy-to-let landlords can offset their mortgage interest payments against their income whereas general home owners don’t have this privilege.
The Bank of England warned last week that the boom in the buy-to-let market posed a risk to the financial stability of the country and could make it more difficult for first time buyers to get onto the property ladder if changes weren’t made.
The buy-to-let market has seen a huge rise since the pensions freedom initiative came into force in April. This enabled people over the age of 55 to withdraw their pension in one lump sum, with many choosing to invest this capital back into the rental market with a hope of bigger returns.
Danny Luke, Business Manager for Quick Move Now said;
Although today’s announcements should help the property market as a whole, some will be left feeling outraged, especially those that have squirreled away all their lives savings into the rental market in the hope of a good return. With the tax relief reductions not coming into effect until 2017, people should still have the opportunity to release any monies tied into their rental properties if they are worried.
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