Tax Relief to End On Buy To Let Mortgages?

[Melboy]

Personally I have been expecting this to happen for the last 10 years now. I do have a feeling that the scrapping of tax relief will come very soon now.

The article in the Daily Fail mainly covers the relevant facts of the for and against reasons.

http://www.dailymail.co.uk/money/buytolet/article-3128563/SIMON-LAMBERT-buy-let-lose-mortgage-tax-break.html

[Richlist]

Absolute bull-######...never gonna happen.

All actions have corresponding consequences and this will at the least lead to:

1. Rents significantly increasing.

2. Fewer landlords, fewer properties available.

3. Absolute anarchy.

The Gov' may be/ have been thinking about doing this in the same way as they are probably looking at 100 other ideas to raise income, cut the deficit and balance the books. When they look at the likely consequences to the housing industry it will be dropped like a hot potato.

[Melboy]

Those words could come back and bite you on the bum RL

Never say never.

I can remember the same response way back in the 1980s when it was stated that scrapping the mortgage tax relief on domestic mortgages would be be a big vote loser to any political party and it wasn't going to happen..... and guess what it did happen.

There were mutterings and condemnations but this was quickly forgotten as the years passed.

Mortgage interest relief at source, or MIRAS, was a scheme introduced in the United Kingdom by Chancellor of the Exchequer Roy Jenkins in 1969 in a bid to encourage home ownership; it allowed borrowers tax relief for interest payments on their mortgage.

In the 1983 Budget Geoffrey Howe raised the tax allowance from £25,000 to £30,000. Unmarried couples with joint mortgages could pool their allowances to £60,000, a provision known as Multiple Mortgage Tax Relief. This remained in place until the 1988 Budget, when Nigel Lawsonended the option to pool allowances from August 1988. Lawson later publicly expressed regret at not having implemented the change with effect from the time of the budget, as it is generally accepted that the rush to beat the deadline fuelled a sharp increase in house prices.

MIRAS was completely abolished in April 2000 by Gordon Brown, who argued it had become a middle class perk.

Receiving MIRAS was one of the justifications given by mortgage advisers when selling endowment mortgages

[Mortitia]

Lucky me! Only have 1 BTL mortgage. I too have seen this coming for some time and disagree with RL - it will come to pass.

[Richlist]

If so there could be :

1. Lots more limited liability loans being offered by mortgage lenders for btl.

2. A surge of limited liability company formations for rental portfolios where the tax rules may be more attractive and business rules allow interest to be offset.

Remember the Gov have a very poor track record with this sort of thing and often don't close all the loopholes.

[Carryon Regardless]

Wait for interest rates to rise and there would be sell offs and snatch backs. The auctions would see a glut of low end properties that would of course depress that market significantly.

Parts of the South might well be able to weather that effect even if individuals couldn't. Up 'ere in't North it would cause much greater social problems. Already there are many empty property streets, over crowding by families that now share where they didn't when the state gave greater (easier) assistance.

Many more properties would become empty as the LL's that fail would have their properties repossessed. The market wouldn't want these properties so they fall into disuse and disrepair.

Now the local Labour gov'ts might well take them on on a compulsory purchase scheme, so maybe it could be a way of restoring council housing stocks.

[Richlist]

Oh dear.....your description sounds similar to the end of the world as we know it.

Of course, I don't believe a word of it. Hardly the sort of scenario the country needs as the economy is picking up and we have another 5 years of hard work ahead to get the deficit down.

Thanks for cheering me up !

[Richlist]

Isn't a btl mortgage a commercial/business loan ? The lending criteria is totally different to a residential loan and therefore falls within the rules reserved for business.

How will the rules differentiate between btl loans, business finance loans for property, bridging finance, loans for improving or developing property etc ?

Then what about the big portfolio holders with thousands of properties and £ millions in property loans. What about the pension and investment funds invested in those sectors...none of them are going to roll over quietly. Sounds like a bag of worms.....totally different from the old MIRAS system in the 1980's.

[Carryon Regardless]

Don't worry RL,

you won't be able to see the peasants begging in the streets from up in your palace.

[Melboy]

I will throw this into the debate.

This Government has to build more homes (shoe boxes) and although they already offering incentives to 1st time buyer's it is well known that removing the tax breaks for BTL's would not overall prove an unpopular move.

In percentage terms it is probably about 70% for and 30% against ( landlord's )

This would prove popular for "Generation Rent" and not forgetting the Tories are supposedly the "home owning" party that they want to portray to the voter's.

[Richlist]

It won't be so popular for generation rent when they see their rents rising big time to compensate for the loss of tax relief.

The increased rents they will be expected to pay will mean saving the deposit for their own purchase will be much more difficult.

No.....it's a total vote looser all round.

Landlords won't benefit, tenants won't benefit. Who wins with this idea?

[Melboy]

Who wins with this idea?

The Chancellor of the Exchequer /Treasury.

A Freedom of Information request revealed that relief for mortgage interest and other financial costs was worth £6.3billion in 2012 to 2013.

The Tories made so many tax promises on what they would not touch during the election campaign that they would have to look to alternative means of raising tax. I bet you the number cruncher's are looking at this as we head towards the July Budget.

[Richlist]

Of course they are/ have been looking at this along with 100 other ideas....most of which are dropped once they start looking at feasibility, impact, advantages, how it affects other economics etc. It doesn't mean it's going to happen.

[Carryon Regardless]

I don't see where you see the rent rise RL.

Market forces dictate the chargeable rents. If it were possible to get more most would already, in fact the media portrays us all as money grabbing, greedy tenant bleeders.

We could ask for more rent but getting it is another thing.

[Richlist]

I agree markets dictate rent levels but usually rent levels for a specific property will be within a range rather than a specific figure. Perhaps we operate in a different market or use a different model CoR.

Many of my rents are discounted for various reasons, If my costs rise then the rents rise. Unlike others I don't automatically raise rents annually. I've been known not to alter rents for 5 years in some cases. But my rents will increase to compensate for loss of profit should mortgage tax relief disappear.

[Carryon Regardless]

I pitch a little below comparable properties but for what I see as good business reasons.

I hope to attract more applicants and not lose good T's to cheaper LL's. Otherwise I view I would be a charity, mind I could get tax relief as a charity so maybe that's our way forward.