UK landlords are set to claim £15bn in property expenses, even after incoming government changes to tax relief are introduced, according to estate agent Ludlow Thompson.
After planned changes to tax reliefs become effective in 2018 to 2019, landlords will still be able to claim approximately £6.3bn in interest rate payments made on loans used to purchase buy-to-let property, despite the amendments to how those reliefs work.
The chancellor expects total revenue to increase to £1bn by 2020 to 2021, after reducing the tax reliefs available to buy-to-let investors on interest payments and property maintenance.
From April 2016, the government will change the wear and tear allowance to the direct cost of replacing furnishings and white goods, instead of being 10 per cent of rental bills.
Stephen Ludlow, chairman at Ludlow Thompson, explained there are still large incentives for potential investors, including significant tax reliefs for costs such as general maintenance as well as legal and professional fees.
“Averaged over the lifetime of a buy-to-let investment recent tax relief and stamp duty land tax changes will have a very negligible impact on total returns to investors.”
Ludlow Thompson noted that in the last year, tax relief on interest rate payments for buy-to-let property were the highest amount claimed, at £6.6bn.
Mr Ludlow added that by providing that large stock of rental properties, buy-to-let landlords play a vital role in enabling labour mobility. “The billions of pounds they invest annually in funding the building of new property and upgrading existing properties helps meet the lack of available housing, especially in London.”
Last week, the Council of Mortgage Lenders’ two-year outlook predicted that the buy-to-let market “faces a challenging period”, as changes to tax treatment and the prospect of macro-prudential intervention run counter to otherwise strong fundamentals, adding that this year’s buy-to-let house purchase activity may peak and fall away below 2014 levels by 2017.