A petition signed by well over 28,000 and calling for the reversal of tax measures introduced to penalise landlords has been dismissed by the government.

The petition, from Midlands landlord Simon J Foster, urges the government to reverse the Section 24 tax change. Before Section 24 was introduced in 2017, landlords were able to deduct mortgage interest from their income tax – at that time it was also possible to offset mortgage application fees and some other loans. 

Now tax is payable on all rental income upfront, even if – combined with an income from a traditional job – it moves the landlord into a higher tax bracket. Instead, landlords now have only a basic rate reduction from their income tax liability for their finance costs of 20 per cent.

Now the government has responded to the petition, as it is obliged to once 10,000 signatures have been reached.

The official response says: “The Government will continue to set mortgage interest relief against rental income at the basic rate of tax. The Government has a responsibility to make sure the income tax system is fair.

“The Government recognises that the private rented sector plays an important role in the UK housing market and economy. However, the Government also has a responsibility to make sure that the income tax system is fair. Under the old system, residential landlords got relief on their finance costs (including mortgage interest payments) at their marginal rate of income tax, which meant that higher rate taxpayers got a more generous tax relief than those on lower incomes.

“To address this, and make sure that all residential landlords are treated the same by the income tax system, the Government phased in a set of reforms to restrict finance cost relief to the equivalent of the basic rate of income tax. The reforms mean that all residential landlords will now receive the same amount of relief. It also reduces the disparity in income tax treatment between homeowners and landlords.

“To minimise the impact on landlords who are affected, the Government chose to act in a proportionate and gradual way. It announced this change almost two years before its implementation. The restriction, introduced in April 2017, was phased in over four years to give landlords time to adjust to the changes.

“To be clear, these reforms do not mean that tax relief on mortgage interest has been abolished. Landlords are still able to claim an income tax reduction equivalent to basic rate tax relief on the finance costs of their rental property. Residential landlords also continue to be able to claim relief at their marginal rate of income tax on the day-to-day costs incurred in letting out a property, such as letting agent fees and replacing furniture.

“The Government understands that people, including those who rent property, are worried about the cost of living challenges ahead. That’s why decisive action has been taken to support households across the UK, whilst remaining fiscally responsible.”

If the petition reaches 100,000 signatures by its closing date of May 10 it would be likely – although not guaranteed – that there would be a Parliamentary debate on the subject.

You can sign the petition here: https://petition.parliament.uk/petitions/627785