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BTL landlords will still claim £16.7bn in relief despite tax changes

Buy-to-let landlords will still benefit from £16.7bn worth of tax relief, based on claims from the latest year’s tax returns, even after the government’s changes to the system are fully implemented by 2020, according to fresh analysis by London estate agent ludlowthompson.

The tax reliefs enables landlords to offset against their rental income expenses such as mortgage interest and other financial costs; property repairs, maintenance and renewals; legal, management and professional fees; and rates, insurance and ground rents.

According to the Treasury, the amount of taxes it collects from landlords look set to increase by £840m a year by 2020-21 after its cuts in tax reliefs on interest payments and property maintenance.


Stephen Ludlow, chairman at ludlowthompson, said: “Despite tightening, buy-to-let tax breaks are still very valuable, highlighting that rental property remains a highly attractive investment vehicle.

“Those tax breaks are essential to ensure that landlords continue to invest in maintaining their properties. If the tax breaks are reduced further then landlords will cut their investment in the properties they own – reducing the standard of UK rental accommodation.”

Government data reveals that landlords claimed £17.5bn in property expenses in the last year. 

Landlords claimed more than £7bn in tax relief on mortgage interest and other financial costs, while £3.7bn was claimed for property repairs and maintenance.

After planned changes to tax relief are fully implemented, landlords will still be able to claim approximately £6.4bn on interest rate costs alone.

Ludlow added: “Labour mobility continues to be central to economic strength. However, if cities like London are to remain a magnet for home-grown and international talent, sustaining a vibrant, high quality rental market is essential. To do that, the system has to work well for both tenants and landlords.”

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  • Andrew McCausland

    I am staggered by the tone of this article. It seems to play into the narrative that landlords are somehow ripping iff the taxman and making huge gains at the expense of the masses.
    Landlords are making normal deductions for exoenses in the course of running their businesses. Would there be comments about British Gas deducting the costs of staff wages or repairs to pipes before declaring their profits? And then being taxed in their profits and not their turnover?
    Change the narrative here. Landlords are being treated differently than other businesses. It will have a detrimental impact on rent levels into the future. The law of unintended consequences, but completely foreseeable.

  • James B

    Incredible that it can be positioned in a manner that taxing landlords on turnover rather than profit (like any other sector) is acceptable, and even a positive in this article !
    But it today’s ‘landlord bashing’ UK nothing is a surprise any more.

  • icon

    but i think the next step will be to tax all businesses on turnover

  • Tony Egan

    Absolutely agree with Andrew and Raymond. I believe the fall out of Section 24 will be harmful to tenants Landlords leaving the PRS combined with landlords raising rents to stay in business and pay the taxes (not to make more profit) will create rent rises. As I understand it, Ireland imposed the same tax and tenants suffered the consequences of an ill thought out tax imposition. It's clear that the Government can't supply the housing needed and in fact are still selling off council properties at discounted rates, really doesn't make sense to me.

  • icon

    Ludlow Thompson’s claim is seriously misleading nonsense, which could lead to mis-selling..

    They have deducted the estimated extra tax payments of £840 million from the expenses of £17.5 billion to arrive at £16.7 billion!

    £7 billion was 100% of the interest that was paid by landlords and deducted from rent receipts when calculating taxable profit last year. From 2020/21 the percentage treated in this way will be 0%. The amount will not be £6.4 billion, it will be ZERO.

    Instead, landlords will be able to deduct up to 20% of the interest amount from the tax that HMRC will calculate on their total income from all sources, including rental profit which will be inflated by not deducting interest.

    So someone paying tax at 40% will pay extra tax equal to 20% of the interest. For a 45% taxpayer the extra tax will be equal to 25% of interest. Some people will be pushed from the 20% band into the 40% band.

    That is why the tax take is expected to increase.

    Under this regime the total tax payable can exceed the real rental profit. That is the real message that should be publicised, not reassuring claptrap based on ignorance and misunderstanding...

    And it is not music to our ears that we will still be able to deduct some of the costs of doing business from our receipts when calculating taxable profit. That is just normal accounting and taxation.


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