Bad News for Landlords on Mortgage Interest Relief
It’s not great news for landlords or anyone else hoping for a tax cut anytime soon.
Chancellor of the Exchequer, Jeremy Hunt, or the guy who does money stuff for the country as you may know him, recently delivered a speech regarding the economy’s future. Unfortunately, it’s not the news that landlords would have hoped for.
What was announced in Jeremy Hunt’s speech?
In his speech, Hunt made it clear that he wanted Britain to be known as a ‘low tax’ country, but actual tax cuts will have to wait until inflation is under control. He explained that the best tax cut right now is to tackle inflation and that any actual cuts would only worsen inflation.
Giving people more money in their pockets to spend during these circumstances would drive up demand for goods. In turn, this would push up prices. He used the same argument for not raising public sector wages. Which is not what people were hoping to hear during a cost-of-living crisis.
What’s the Chancellor’s plan?
The Chancellor is calling on all of us to help fire up the UK’s economy by investing in new technology (so not bricks and mortar, then). He wants to turn the country into a European Silicon Valley (outside of the EU, of course).
Hunt believes that world-beating enterprises, a world-class education system and opportunities for everyone to tap into their potential will all be essential for building a better future for the UK.
What do the Chancellor’s announcements mean for landlords?
A petition has recently been making the rounds, calling for a change in the tax system that’s been severely impacting landlords. The changes from 2016, which affected mortgage interest tax relief, have caused a stir in the private rental sector, and landlords are feeling the heat as a result.
The petition demands a reversal of these changes and asks for new tax reforms to keep landlords in the sector, which will slow the shortage of available homes and possibly even help calm soaring rental prices.
It seems, however, that any reversal of mortgage interest on tax relief will be put on the back burner for the time being.
What was the gist of Jeremy Hunt’s speech?
Hunt’s speech concentrated his efforts on key growth sectors, such as:
- Digital technology
- Green industries
- Life sciences
- Advanced manufacturing
- Creative industries
But the speech was largely criticised by analysts for lacking detail and specific targets.
Susannah Streeter, a senior investment and markets analyst at a business consultancy, said that the speech was ‘sorely lacking in detail’ and that ‘the people behind the plan are unsure of how it will be paid for’.
She pointed out that while the Chancellor is promising a low-tax economy to incentivise companies to invest, he’s also saying that spending must be curtailed.
Competition for inward investment is heating up with subsidies being offered by nations across the world. So, while the Chancellor’s vision is admirable, it’s not clear where the funding will come from.
What next for landlords?
It seems that it’s business as usual for landlords at the moment, although pressure won’t abate. Many with investment properties believe they’re getting squeezed from every angle, be it the inability to claim on mortgage interest rates or paying out more to meet the increasing legislation. Not to mention rising mortgage interest rates.
Reports indicate that a growing number of buy-to-let owners are selling up and leaving the sector. That’s not good news for the overall health of the housing market, and the Section 24 petition continues to gather pace as a result.
It has quickly amassed 30,000 signatures and will need to be debated in parliament if it reaches 100,000 signees.
What does the future hold?
Maybe the Chancellor’s vision for a European Silicon Valley will come to fruition, and we’ll all be celebrating tax cuts (including those for landlords) and a thriving economy in the near future.
But for the time being, it looks like more frustration from landlords, who believe they’re being shortchanged.