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Mortgage Interest Relief changes come into force today

Pool table

The controversial phasing out of Mortgage Interest Relief announced in the 2015 Budget finally came into force today – a move that the Residential Landlords Association (RLA) claims could see rents rise by 30% and stifle investment in buy-to-let.

The changes introduced mean that individual landlords will have the proportion of mortgage interest that they are allowed to deduct reduced when calculating their income tax – and as of April 2020 – mortgage interest will no longer be an allowable expense. Read our Buy to Win guide to find out how these changes will affect landlords.

RLA research has shown that two-thirds of its members believe that they will need to increase rents to cope with the additional tax burden, with 58 per cent of them planning on cutting back investment in property.

Landlords can continue to invest in residential property without losing mortgage interest relief if they purchase through a limited company. However, this won’t protect existing portfolios from the changes and moving property out of individual ownership and into a limited company will incur SDLT charges as well as Capital Gains Tax.

RLA Chairman, Alan Ward said: “Today’s tax increases contradict everything the Government has said about needing a larger rented sector to give tenants more choice and more affordable housing.

He added: “It is tenants who will be hit hardest by these punitive tax increases. Aside from likely paying more in rent, in many places they will face a growing shortage of affordable places to rent.

“We call on Ministers to undertake a major review of the impact of this policy and if all the predictions about its impact are right, to abolish the changes in the autumn budget.”

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