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Only One in Five Landlords Expected to Pay More Tax Under Section 24
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Only one in five landlords are expected to pay more tax when new section 24 rules, under the Finance Act 2015, are implemented from 2017.
Only One in Five Landlords Expected to Pay More Tax Under Section 24
Yesterday, Jane Ellison, the Financial Secretary to the Treasury, announced in the House of Commons that just 20% of private landlords will be forced to pay more tax when the law, which restricts the amount of tax relief that landlords can claim on their mortgage interest payments, comes in.
Ellison claimed that she does not expect the changes “to have a large impact on either house prices or rent levels, owing to the small overall proportion of the housing market that is affected”. She adds that the Office for Budget Responsibility “has endorsed that assessment”.
Ellison was responding to proposals for another review of the impact of section 24 on affordable housing. She believes that this “is unnecessary” as “the changes made by section 24 are being implemented in a gradual and proportionate way”.
From 6th April 2017, the amount of income tax relief that landlords can claim on residential property finance costs will be reduced to the basic rate of tax – 20%.
The changes will be implemented gradually over a four-year period, ending in 2020. The tax rate will firstly be reduced by 25%, then 50%, then 75%, then 100% at the end of the rollout.
The Government has put together a guide on who the change will affect and how it will be introduced: /government-guide-tax-relief-changes-residential-landlords/
A recent survey by SellingUp.com found that the one change that is likely to discourage landlords from investing further in the property market is the mortgage interest tax relief cut.
It is also a concern that the tax restriction will force landlords to put their rents up, as they face dwindling profits.
How will the forthcoming tax changes affect your position in the buy-to-let sector? And do you believe that the Government should be reviewing section 24’s impact on affordable housing?
