This petition was submitted during the 2015–2017 Conservative government
Petition Reverse the planned tax relief restriction on ‘individual’ landlords
We operate as sole traders and incur costs in the course of running our business. The planned restriction will unfairly target us by preventing us from offsetting costs in the same manner as other sole traders. We ask that the planned restriction be reconsidered as it has unfair implications.
The Institute for Fiscal Studies has stated, in response to the Budget, individual landlords are already taxed more heavily than other homeowners.
The private rented sector is heavily reliant on individual landlords. The planned change is likely to result in higher rents due to landlords looking to offset higher tax liabilities.
In some cases, employed individuals own buy to let properties as investments for retirement. The planned restriction would adversely and unfairly affect them.
This petition is closed This petition ran for 6 months
This response was given on 27 August 2015
The Government is committed to a fair tax system so is restricting relief on landlord property finance costs to the basic rate of tax, reducing the generosity for wealthier landlords.
Read the response in full
The Government is committed to a fair tax system so is restricting tax relief landlords can claim on property finance costs to the basic rate of income tax.
Landlords are currently able to offset their mortgage interest and other finance costs against their property income, reducing their tax liability. This relief is not available for ordinary homebuyers and not available to those investing in other assets such as shares. Currently the landlords with the largest incomes benefit the most, receiving relief at their marginal tax rates of 40% or 45%.
By restricting finance cost relief available to the basic rate of income tax (20%) all finance costs incurred by individual landlords will be treated the same by the tax system. This recognises the benefits to the economy that investment in property can bring but ensures the landlords with the largest incomes will no longer benefit from higher rates of tax relief.
By unifying the treatment of finance costs for all individual landlords, the Government is reducing the distortion between property investment and investment in other assets, and reducing the advantage landlords may have in the property market over ordinary homebuyers.
Less than 1 in 5 (18%) of individual landlords are expected to pay more tax as a result of this measure. Taking account of the other measures from the Summer Budget, the Office of Budget Responsibility (OBR) have not adjusted their forecast for house prices. The OBR expect the impact on the housing market will be small. Furthermore, this change is being introduced gradually from April 2017 over 4 years. This will give landlords time to plan for and adjust to these changes.
Other parliamentary business
Petitions Committee considers petition
You recently signed a petition on the UK Government and Parliament Petitions website to: Reverse the planned tax relief restriction on 'individual' landlords: https://petition.parliament.uk/petitions/104880
The Petitions Committee considered this petition at its meeting on Tuesday 8 September.
The planned tax relief restriction is part of the Finance Bill currently being debated in the House of Commons. This Bill will be looked at by a Public Bill Committee – a group of MPs who go through a draft law in detail and debate it.
The Public Bill Committee can receive views from the public now.
You can find out how to send your views to the Public Bill Committee here: http://www.parliament.uk/business/news/2015/july/have-your-say-on-the-finance-bill-/
You can follow the progress of the Finance Bill here: http://services.parliament.uk/bills/2015-16/finance.html
Because the issue is currently being looked at in Parliament, the Petitions Committee decided not to take any further action on this petition. You can see all the decisions it made at its meeting here: http://www.parliament.uk/business/committees/committees-a-z/commons-select/petitions-committee/news-parliament-2015/8-sept-committee-decisions/