Summer Budget 2015 - landlords hit on interest relief

Talk about giving us a bloody nose. George Osbourne has just smacked many landlords right in the face by announcing new restrictions on mortgage interest relief.

In his summer budget 2015 the Chancellor has announced that landlords in the higher income tax bracket will no longer benefit from mortgage interest relief.

George Osborne said it was unfair for wealthy landlords to offset mortgage interest against income when homeowners can’t, before describing the rapid growth of the sector as a possible risk to UK economic stability.

The restrictions will be phased in, more details on this to come, but it's sounding pretty painful for many of us.

Do you need a hanky?

So here's a further update on what's happening -

• Landlords who get 40% or 45% tax relief on  mortgage interest will be restricted to 20% (basic rate) from 2020. - read the Gov policy paper for - Restricting finance relief for landlords

In the Governments own words this policy - will ensure that corporation tax receipts are not affected by large compensation payments made in relation to banks’ past misconduct and management failures, ensuring that the sector makes an appropriate contribution to restoring the public finances.

The change will be introduced gradually from 6 April 2017.

Interest deductions from property income will be restricted to:

• 75% for 2017/18
• 50% for 2018/19
• 25% for 2019/20
• 0% for 2020/21 onwards

Landlords will then claim a reduction in their income tax bill at the 20% basic rate for the interest costs not allowed as a deduction.

More in the budget to impact on landlords

• From April 2016 the 10% wear and tear allowance will be replaced by a system that based on the actual costs incurred.
• The reduction of social rents in England by 1% a year for 4 years from 2016.
• Rent-a-room scheme will increase from £4,250 to £7,500 a year from April 2016 - Read the Rent-a-room relief policy doc
• Potential restrictions on BTL lending to curb growth of BTL sector following  Bank of England concerns shared in Financial Stability Report.
• Family homes worth up to £1m passed to children/grandchildren to be taken out of IHT. Allowance on top of existing IHT thresholds.

More on this story -

Landlords and tenants hit in the pocket by the pro-homeowner budget http://t.co/uLQ7oxz5Iq

— Telegraph Property (@TeleProperty) July 8, 2015

Profits slashed for wealthy buy-to-let landlords in Budget crackdown on mortgage interest tax relief: http://t.co/4t04tEdpxZ

— This is Money (@thisismoney) July 8, 2015

Budget: Buy-to-let changes not as bad as feared.. read our Blog http://t.co/ZbbdZdAyyN

— Anderson Harris (@Anderson_Harris) July 8, 2015

Summer Budget: chancellor cuts landlord subsidy http://t.co/OO1NkZDcQf

— Citywire Money (@CitywireMoney) July 8, 2015

Buy-to-let landlords take £2bn drubbing http://t.co/mhtaiEZjcU

— TimesBusiness (@TimesBusiness) July 8, 2015

Buy-to-let landlords take a hit http://t.co/uXxk6nSOEr #free #budget2015

— estatesgazette (@estatesgazette) July 8, 2015

More industry responses - 

David Orr, Chief executive of the NHF give his response



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