The House of Commons has recently suggested that a buy-to-let tax review is carried out. Depending on the outcome of the review, property owners may see more tax relief in the future. Rising mortgage rates and downgrades to tax relief have increased pressures on property owners. The Bank of England recently announced that the base rate is 4%.  

Whilst some reports reveal that some new fixed-rate mortgages are below the base rate, property owners on variable mortgage rates may see their monthly outgoings being impacted as their interest payments increase. 

How would a 4.5% base impact property owners?  

It has been predicted that the base rate may increase more by Spring, rising from 4% to 4.5%. This increase would impact property owners as it is likely they would increase their rents in response to the base rate. according to Finbri survey, 52% of UK property owners would increase their rents. They also found that 44% of property owners would think about selling their investment properties.  

Tax relief and the Spring Budget 2023:  

The National Residential Landlord Association (NLRA) has suggested that the government should review all taxes that have an impact on the lettings sector by mid-March for the Spring Budget 2023.  

There has also been a petition calling for the government to reinstate mortgage interest tax relief which has gained more than 30,000 signatures. This was in response to section 24 (Finance Act, 2015) as it restricted the amount of tax relief that property owners can receive on their finance costs.  

The reintroduction of this relief has been supported by Propertymark even though it has been estimated to cost the government £1 billion since they see that there would be more long-term benefits such as stimulating housing supply and reducing rents. this would also benefit the government by increasing their savings through reduced housing benefits required to support tenants since properties would become more affordable. 

The government’s response so far:  

The government has currently expressed mixed views on property owner taxation. The government has responded to the petition which asks for mortgage interest rate relief by saying it will “continue to set mortgage interest relief against rental income at the basic rate of tax”, as it feels that is “fair”. It may still be debated in Parliament if the petition reaches 100,000 signatures.  

Furthermore, Jeremy Hunt (Chancellor of the Exchequer) has also reduced expectations for tax cuts in the Spring Budget 2023, saying that “the best tax cut right now is a cut in inflation” and that tax cuts should come ““when the time is right”. 

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