The independent Institute for Fiscal Studies has described the justification given by Chancellor George Osborne for curbing tax breaks for buy to let landlords as “plain wrong.”
Chancellor George Osborne announced last week that from 2017 he would be clamping down on buy to let landlords by removing the right to claim more than the basic rate tax equivalent in relief for mortgage interest. He is also tightening the rules about claiming for wear and tear by allowing claims only for money spent rather than the annual 10 per cent of rental that’s currently allowed automatically.
But the IFS - a respected body often used as a source of independent verification of figures used by government and political parties - is sharply critical.
The comments were made at a briefing on the Budget by IFS director Paul Johnson. Here is his comment in full:
“The tax treatment of rental housing will be made less attractive though. At present if you own a property which you let out to tenants you can set any mortgage interest costs against tax due on rent received. The Budget red book states that this means that “the current tax system supports landlords over and above ordinary homeowners” and that it “puts investing in a rental property at an advantage”. This line of argument is plain wrong. Rental property is taxed more heavily than owner occupied property. There is a big problem in the property market making it difficult for young people to buy, and pushing up rents. The problem is a lack of supply. This change will not solve that problem.”
The Chancellor’s announcement has received criticism from throughout the lettings sector.