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Bring back Mortgage Interest Relief - even HMRC would benefit!

Scrapping a tax hike on rented housing may help ease the housing crisis faced by tenants, according to an analysis by Capital Economics.

Since 2021 mortgage interest tax relief for landlords has been limited to the basic rate of income tax. 

Modelling conducted for the National Residential Landlords Association by research consultancy Capital Economics suggests that reinstating Mortgage Interest Relief (MIR) in full for the private rented sector would help alleviate the sector’s supply crisis.


According to the analysis, if the Bank of England’s base interest rate was to peak at 5.0 per cent and remain above 2.5 per cent until the end of 2027, as many predict, up to 13 per cent - or 735,000 - of private rented properties could be lost across the UK compared to 2021. 

This would lead to a loss of £1 billion of Income and Corporation Tax revenue per year for the Treasury.

With MIR reinstated, Capital Economics estimates that 110,000 fewer properties would be lost from the private rental market, with the Treasury benefiting to the tune of £400m in Income and Corporation Tax.

This research comes amid a supply crisis with the Bank of England, the government and the cross-party Housing Select Committee are among those to have warned that demand across the sector is outstripping supply.

Capital Economics also found that scrapping the mortgage interest reforms could reduce future rental inflation in the sector and reduce financial pressures on landlords planning maintenance and improvements.

The NRLA is calling on the government to undertake a full review to examine the impact of recent tax rises on the sector. 

Such a review should cover the effect MIR changes have had on the supply of private rented homes and the cost of accessing rented housing. It must also consider the rationale which underpinned the change given the Institute for Fiscal Studies has previously argued it is wrong to suggest landlords have been taxed more favourably than homeowners.

Ben Beadle, chief executive of the National Residential Landlords Association, says: "In 2015 the government said it wanted to ‘create a more level playing field between those buying a home to let and those buying a home to live in’. In doing so it hiked costs for responsible landlords and totally ignored the burden it would create for renters.

“In the midst of an unprecedented cost-of-living crisis, the government needs to put economic reality before political pride and reverse this travesty of a reform.

“Tax hikes on landlords, exacerbated by rising interest rates, have deepened the supply crisis. And as this research demonstrates the situation is unlikely to improve until and unless it is reversed.

“A radical rejection of these damaging policies is necessary to help stem the tide of lost rental properties, limit rent rises, and boost Treasury revenue.”

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    Why are we governed by imbeciles? It was obvious to anyone that the extra costs incurred by landlords would be passed on to tenants, and that landlords would be forced to sell if interest rates rose, reducing rental stock and increasing rents further. The most cursory calculation would show that any benefit from houses becoming available for first time buyers would be more than wiped out by increased rents for those saving up for a deposit.

     G romit

    They're not imbeciles - you just don't know their agenda. I.e, takeover by large corporates.

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    Simple fact is mortgage costs are more than doubling as they come off their fixes. I had 5 due to end this year. A product switch on the first one added nearly £500 a month to the payments. That's just on one of them. More are due in September and November. In order to cover that extra £500 I need to increase rents.
    If I increase them by £500 it doesn't cover it because of Section 24. We have been artificially catapulted into a higher tax band as our finance costs aren't deducted from our taxable income.
    The government take the first 40%, 60% or 45% of the increased rent as extra tax then credit back 20% of the mortgage payment as a small tax rebate. So if I increase the rent by £500 they take between £200 and £300 and then credit back £100. Either way I'm out of pocket by either £100 or £200 a month.
    If I want to increase the rent by enough to cover the extra interest it would need to go up by between £670 and £1000 a month. I haven't made a penny extra. All of that increase has gone to HMRC and the mortgage lender. I then have to work out how to pay for all the standard price rises on insurance, maintenance, safety checks, etc.
    Luckily for my tenants I don't need to concentrate all of the pain on one household. I can spread it across all my houses. While some of the rent increases will seem hefty they will be well within general market rent rises.
    For landlords with only one or two properties they don't have that option. How many have tenants that can afford an extra £670 a month on their rent? How many can afford to make a loss? Even if you have fantastic tenants and hate the thought of making them homeless how much of your own standard of living are you willing to sacrifice for them?


    12 interest rises in as many months?? I have only a few properties, cheaper ones so rents can't be hiked to cover it! I've raised the rents but it has to be viable and affordable for the tenants too...have LHA rates gone up to reflect the increased rents over the past year?? If not, where are those families going to find the increase, in addition to energy, food, fuel, bills etc?? They'll default on rent and the whole deck of cards will come tumbling down! No wonder landlords are making a sharp, swift exit! It appears that they've become unpaid tax collectors and a steady supply of work for utility companies and regulating organizations, in order to comply with increasing regulations! If we wanted to work for the government or council, we'd be doing 9-5, good salaries, paid holidays, good pension etc !!



    Remember they're "working from home" for much of the week!

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    Great points made by Jo, and I agree with them all. One can only assume the govenment is so in need of more money from taxes, that it is their overriding and only concern. Either that or they are indeed really stupid, and haven't looked at the impact section 24 has on renters and the PRS in general. Apart from all that, it's a totally unfair tax, that companies dont have to pay. Any other business would have gone bankrupt, and would not have been able to survive at all. This is not leveling up, it's not even leveling down! It's a simple tax raid on private Landlords who provide homes for people who mostly can't afford to buy one themselves, and where the govenment find it impossible to provide enough suitable housing, let alone repair the ones they do have.

     G romit

    This Government is in the pockets of global corporatists aka big business aka big Tory donors.

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    • A G
    • 01 June 2023 07:45 AM

    It isn’t just the issues surrounding soaring interest rates and less available loan products for btl purposes. It is the ridiculous regulation, trying to hold landlords to ridiculous energy ratings that normal home owners don’t need to achieve whilst removing decision-making abilities from landlords: you have no choice but to accept a tenant with a pet, you must take someone if they are on benefits, you can no longer terminate and remove awkward tenants from your property. These are stupid counterproductive initiatives individually but collectively, ensure that most private landlords will end up walking away, investing elsewhere.


    Well said!

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    I’ve also had to consider rent increases for some of my properties due to mortgage rates. Some tenants haven’t adjusted to going without life’s pleasures beer gardens deliveroo buying drugs mini breaks leased cars Ibiza trips Glastonbury
    So my solution is to introduce socialism for all and raise everyone’s rent! Bit harsh on tenants that save their money and budget accordingly but doesn’t cause too much disruption on the feckless. (They will complain the most regardless)
    GR Shelter Acorn and LRU should be happy but they too will complain I’m sure. Marxists should be happy as I’ve nicked their idea originally

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    Virtually everything that’s wrong with PRS was deliberately caused by Government, Regulation’s and Taxes so now we are surprised.
    Government can’t loose no matter how stupid their Policy’s are or the people behind them.
    The increases clobbered landlords but very little options if you can’t cover the extra costs you’ll have to sell.
    Take a C/gains tax hit if some equity in there or pay taxes on a loss with-in 60 days, the next buyers pays stamp the duty again so where do Government loose ?.

    Peter Why Do I Bother

    Good point Michael, government is raising taxes to cover up their inefficiencies like yesterdays report on the woman who has lifted 1/4m out of the public purse because the local councils and government Peloton World Champions cannot be bothered to do their jobs properly or get into the office.

    Makes me absolutely sick to see the wanton waste of the public purse and reduction in services across the board. Over 400k of the fkrs work in the civil service and I have yet to see one do a good job.

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    I spent the last 15 years, building and maintaining a small portfolio of 8 family houses which i intended to use as my pension. Most tenants have been there since day one and I have an amazing relationship with them. I have watched young children grow into teenagers, babies go from a shuffle to walking and all in a safe place they call their home. Then the government stepped in, shattered my dreams and in 2 weeks' time I will be losing another tenant of 8 years with 2 young children under the age of 7. They will be placed into an emergency hostel. I will then have 2 more left to sell and as soon as their mortgage rate is up, they will be gone. I have had enough; I am not in control of my destiny and i will leave it to the local councils to sort out.

    Just wait until they target LTD company BTL landlords as that will be coming, you can be assured. Next is holiday homes and Airbnb and then LTD co BTL. So, all those that purchased their personal BTL's from themselves via a LTD company, and spent 1000's doing so, I feel for you.

    I feel truly dreadful for my tenants, and their children and I have had many a sleepless night. I'm sure they think I am a greedy landlord taking out his profit which isn't the case.

    I was looking to retire at the age of 65 with a self-made pension, now I will be reliant on government handouts.

    Peter Why Do I Bother

    I am 20+ years in Craig and feel the same way, luckily I have a decent job but hardly anything of a pension so now it will be hard work until I am 60 to get together a decent amount.

    I was going to sell but I am not now, most of my apartments will be turned into airbnb and a lot less hassle without the ridiculous regulation.


    Doubtless you will have CGT to pay,then if you get run over by the Clapham omnibus another 40% will be wiped off - maybe one or the other but both seems way over the top.


    Pensions are another issue.
    Any other sole trader can contribute to a SIPP and enjoy the tax relief that goes with it. Landlords can only pay in £2880 of rental profits as it is classed as unearned investment income. Back in the day when we had taper relief on the CGT that may have been fair enough. Our properties should have provided a decent index linked retirement lump sum. Now the government take 28% of the increase that has only been caused by inflation and artificially turned us into higher rate tax payers it's a double whammy. Or blatant discrimination.
    We also lose out on savings interest. If we were taxed in a traditional way a great many more of us would be basic rate tax payers and would keep the first £1000 a year in interest on savings tax free. Now we only get £500 tax free.

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    You should be glad you’re not in Scotland, our restrictions are way ahead of those in the South at the moment, thanks to the SNP and The Greens! 3% is what we can increase rents by which is nothing when mortgages have gone up hundreds.
    If you can prove your costs have gone up significantly you can apply to the tribunal for 6% but have virtually to supply every piece of personal financial information you have which the tenants can see!
    The whole system is broken!
    Try and find the article in The Negotiator, “ Property tribunals guilty of ‘gross invasions of landlord privacy“ Very interesting.
    Sorry, I’m not allowed to include the link apparently

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    Well said many of you above. Never thought that I would be in a position where a Government have wilfully and blatantly abused their powers to bring down an industry.
    I am in the process of using a section 21 to get a non-paying tenant out of my house in order to sell. He has appealed and now I need to go to Court to fight his made up claims about the house being unfit to live in. More time that he will live in the property rent free and more time before I can get in there to do it up and sell.
    I can only see this getting worse as tenants will feel more empowered. There is no way now that I will continue as a Landlord, apart from 3 long term tenants that I have, but these are now in danger with the costs that I am currently having to face because of poor and short term Government thinking/policies.

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    Ditto to all the comments, either my rents will have to go up significantly next year (tenants may not be able to afford it) or I am selling everything in one go, sod the lot of them.

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    Finally some powerful words from Ben Beadle!


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