Buy-to-let landlords face new challenges in the months ahead after the chancellor announced in his latest budget that he would be reducing tax relief for investors.
It was announced in the budget that from April 2017 landlords would be unable to receive tax relief worth up to 45% of interest payments on their buy-to-let mortgages, with the maximum relief to be capped at 20%.
However, the new arrangement will be slowly implemented over a period of four years in an attempt to minimise the inevitable difficulties of adjustment.
In another potential blow to landlords, George Osborne announced that landlords will no longer be able to claim a 10% reduction against wear and tear as a matter of course; from April 2016 they will only be able to claim tax relief against losses they actually incur.
The budget announcements have led to speculation among residential conveyancing and property solicitors that there could be a surge of buy-to-let sales as the “squeezed middle” find the buy-to-let market to be insufficiently profitable. Furthermore, say experts, rents will be driven upwards.
Osborne said that the changes would help create a more level playing field between buy-to-let investors and first-time buyers. “So we will act. But we will act in a proportionate and gradual way, because I know that many hardworking people who’ve saved and invested in property depend on the rental income they get,” said Osborne.
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