London-focussed lettings agency ludlowthompson says buy to let landlords across the country claimed a record £17.7 billion in tax relief last year, despite new fiscal regulations.
This is up from £17.4 billion claimed in the previous year.
ludlowthompson explains that even once all of the government’s planned reductions to buy to let tax relief are fully implemented by 2020, landlords will still be able to offset £16.7 billion of their expenses against rental income.
This is despite tax clampdowns since 2015 including changes to the way wear and tear allowance is calculated and the amount of income tax relief available on interest on mortgages.
The agency says the breakdown includes £7 billion in tax relief on mortgage interest and other financial costs in the last year, plus a further £4.1 billion claimed for property repairs and maintenance.
Landlords are still able to claim tax relief when purchasing furniture for a rental property under wear and tear allowance.
Tax reliefs allow private residential landlords to subtract their costs from their rental income – just as a small business is able to offset its expenses against its income. These costs include a tapered element of mortgage interest payments to be fully implemented by 2019-20; property repairs, maintenance and renewals; legal, management and professional fees; and rates, insurance and ground rents.
Stephen Ludlow, chairman at ludlowthompson, says: “The tax grab on buy to let investment is unwelcome but it has not undermined the attractions of buy-to-let especially when compared to the volatile stock market.”
“You’re still able to offset the vast majority of your costs - ensuring landlords will still benefit from tax relief on a high proportion of their rental income.”
But Ludlow warns that policy-makers “need to ensure they still encourage landlords to invest in buy to let. They are essential for ensuring a strong supply of high-quality rental property. This helps improve labour mobility, particularly in large economic hubs such as London. The government should look to keep further intervention in the sector to a minimum.”