Petition to reverse Section 24 restricting tax relief for landlords

A petition demanding the reinstatement of tax relief for landlords which allows interest from mortgage payments to be offset against the income from rent has gained over 30,000 signatories.

The petition asks that the changes made under section 24 of the Finance Act 2015, which restricts the tax relief that landlords can receive on their finance costs to the basic rate of income tax, be reversed.

Reinstate tax relief allowing mortgage interest to be set against rental income

We want the Government to reinstate the ability of landlords to set the full amount of mortgage interest 
against rental income, before tax is calculated.

Like many self-employed business people I am a small, well-established private landlord that is now 
struggling to make any money from letting properties.

Unless the ability to offset mortgage interest against rental income is reinstated I will like many 
be forced to sell my properties. This could reduce the amount of properties available on the
private rental market.

Section 24 was introduced to stop landlords with higher incomes benefitting from too generous tax allowances, and was phased in over a five-year period between April 2017 to April 2020.

The Finance Act 2015 was introduced by then-Chancellor, George Osborne, who said: "Buy-to-let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income whereas homebuyers cannot, and the better off the landlord, the more tax relief they get."

"Under this new law, landlords can no longer deduct those additional costs from the income they earn on their properties before it's taxed."

Before introducing Section 24, the government of the day projected that only one in five individual landlords would receive less relief as a result of the new rules, with higher-earning landlords bearing the brunt of the change. However in 2023, as landlords now pay tax on their gross rental income, this may push some into a higher tax bracket.

Currently individual landlords operating in the private rented sector now get a tax-credit at the basic 20% rate on the lower amount from the following:

• Finance costs, such as mortgage interest and interest on loans to buy fixtures and fittings
• Fees incurred when taking out or repaying mortgages or loans
• Property business profits
• Adjusted total income

Landlords who operate as a limited liability company are subject to different tax rules and can declare their rental income after deducting their mortgage costs.

The petition highlights the effect that Section 24 has on rental stock in the industry, as well as the predicted benefits if the full relief were re-introduced.

Marc von Grundherr, Director of Benham and Reeves, said: “A survey of our landlord base found that 73% of those who have plans to exit the sector would refrain from doing so if these changes were reversed."

Despite this, the government has responded to the petition by saying that it will continue to set mortgage interest relief against rental income at the basic rate of tax to ensure that the income tax system is fair to all involved, rather than giving landlords certain rights over and above homeowners - as was the initial intention of the changes.

According to parliamentary rules, the petition will be considered for debate in parliament if it achieves over 100,000 signatures. You can read and sign the petition here: https://petition.parliament.uk/petitions/627785

Contact us online or call 0161 511 5339 for advice on the tax implications of renting property, or to arrange a complimentary Compliance and Performance Review of your current portfolio.

This blog article is intended as a guide only, and does not constitute legal advice.