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Tax changes 'level the playing field' - government responds to BTL petition

The government has responded to a petition calling for it to abolish the 3% stamp duty surcharge and reintroduce full buy-to-let mortgage interest tax relief.

In its response, the government says that both measures seek to 'support first-time buyers' and 'level the playing field for homeowners'.

It also says that neither measure is expected to 'impact rent levels'.

As of Sunday evening, the petition - started by Mark Homer - had 13,955 signatures. It reached the 10,000 signature milestone within the first week of launching, meaning the government was required to issue a formal response.

Should the e-petition reach 100,000 signatures before November 14, it will be considered for a Parliamentary debate.

In April 2016, the government introduced a controversial 3% stamp duty surcharge on the purchase of additional or second homes. A year later, last April, it began the process of reducing the interest tax relief that buy-to-let landlords can claim on their mortgages to the basic rate of income tax. 

The wording of the petition claims that the measures - which it describes as 'disastrous' - are driving landlords away from the rental sector which is 'increasing homelessness' as tenants are faced with 'less choice' and 'higher rents'.

The government's response is reproduced in full below.

Higher SDLT on additional dwellings and restricting finance cost relief seeks to support first-time buyers and level the playing field for homeowners. Neither measure is expected to impact rent levels

The Government introduced changes to finance cost relief as part of a package of measures at Summer Budget 2015 to help reduce the deficit and rebalance the economy. By restricting landlord’s finance cost relief to the basic rate of income tax we are helping to reduce the advantage landlords may have over homeowners in the property market. Income tax relief for finance costs is not available to ordinary homebuyers. It is also not available to those investing in other assets, such as shares, so we’re helping to reduce the distortion between property investment and investment in other assets.

Previously, landlords could get relief on their finance costs at their marginal rate of income tax. By restricting finance cost relief to the basic rate, all individual landlords will receive the same rate of income tax relief on their finance costs. 

Landlords can still claim income tax relief at their marginal rate of tax on day-to-day running costs incurred in letting out a property, such as letting agent fees and replacing furniture. Finance costs are different to other expenses as having a mortgage allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would have done without it.

Using actual self-assessment data, HMRC estimate that only 1 in 5 landlords will pay more tax on their property income because of this measure. We appreciate that some of these landlords may face difficult decisions. This is why the government has chosen to act in a proportionate and gradual way. Basic rate income tax relief will still be available on all landlord's finance costs, and the government announced this change almost two years before its implementation. The restriction, introduced in April 2017, is being phased in over 4 years. This gives landlords time to adjust to the changes.

Given that only a small proportion of the housing market is affected by this change, the government does not expect it to have a large impact on either house prices or rent levels. The Office for Budget Responsibility (OBR) also expect the impact on the housing market will be small. 

In April 2016, the Government introduced higher rates of Stamp Duty Land Tax (SDLT) for those purchasing additional properties. While it is right that people should be free to purchase a second home or invest in a buy-to-let property, the Government is aware that this can impact on other people’s ability to get on to the property ladder. The higher rates are part of the Government’s commitment to support first time buyers. Since the higher rates have been introduced, over 500,000 people have bought their first home, and first-time buyers make up an increased share of the mortgaged property market.

At Autumn Budget 2017, the Government announced further changes to permanently increase the price at which a property becomes liable to SDLT to £300,000 for first time buyers, with first-time buyers purchasing homes worth between £300,000 and £500,000 saving £5,000. This relief means that 80% of first-time buyers will not pay SDLT, and 95% of first time buyers who pay SDLT will benefit from the change. Since its introduction, 69,000 people have benefited from the relief. Over the next five years, this relief will help over a million first time buyers getting onto the housing ladder.

The Government has also taken wider action on housing to help renters get a fair deal and to address homelessness and rough sleeping. At Autumn Budget 2017, the Government committed to £2 billion of extra funding for affordable housing, including for social rented homes, bringing total investment in the Affordable Homes Programme to more than £9 billion. The Government has also allocated over £1.2 billion by 2019/20 to help reduce and prevent homelessness and rough sleeping and is implementing the Homelessness Reduction Act, which will ensure that more people get the help they need earlier to prevent them from becoming homeless in the first place. The Government aims to halve rough sleeping by 2022 and eliminate it by 2027, and has set up a Rough Sleeping and Homelessness Reduction Taskforce to develop a cross-Government strategy to work towards this commitment.

HM Treasury

  • Barry X

    It's not worth spending time plodding through point-by-point this utterly dishonest, out of touch and financially twisted (ok, plain dishonest) garbage reply.

    superficially only..... how the hell can taxing landlords on turnover instead of doing it more fairly on profit "benefit first time buyers"? Is the government handing over the money they've nabbed off us (deceitfully) to first time buyers to help them save a deposit or something? Thought not!

    In what way has the greedy, ill-conceived and over-complicating 3% surcharge SDLT helped first time buyers? In generally not in the slightest, I'm quite sure. Oddly enough, if you think carefully about the implications its probably worked against quite a few who anyhow can't afford to buy right now so still need to rent somewhere to live.

    Vote Tory - get Labour..... sadly we must accept betrayal from our weak-minded and incompetent government. There's absolutely no doubt in my mind that
    (a) they are hostile to landlords and don't give a damn about the private rental sector - it seems to them we're here to be milked, fleeced and whilst at it blamed too,
    (b) the government are so bankrupt of useful, popular ideas, and are running so scared that they will be booted out in the next election that they are trying to re-invent themselves as the opposition in the hope of confusing a few "young" voters into backing them instead of the even more disastrous Labour party.

    It's a shame they don't seem to realise that they'd do so much better if only they showed strong, honest leadership with imaginative, well thought out policies that clearly have a good chance of working and being useful. They should have delivered properly from day-1 on Brexit, and just got on with it, instead of making it almost their full-time job to obstruct and delay it whilst also trying to magic it out of existence.

    Bunch of incompetent, untrustworthy idiots in my opinion. Still, what do I know?

  • Barry X

    PS. and no, home owners are NOT a business and so any attempted comparisons are deeply flawed irrelevance.

    Better perhaps to compare landlords to, say, restaurants..... why doesn't the government try to "help first time buyers" by taxing restaurant owners on the cost of all the food and other consumables they buy-in. These things are basic expenses in their industry sectors, just like loan interest in the property sector. Let's "level the playing field" and "help first time buyers" by shifting the emphasis to taxing innocent restaurant owners out of business ....or anyone, really.... it seems the "Tory" government would quite like to steal a march on Labour by "nationalising" us all before they do - or at the very least go some way towards it.

    Oh well.

    PPS. I like restaurants - it was just a random example for illustration purposes only :)

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