Worryingly, thousands of people in the East Midlands who live with their partner but are not...
Buy-to-let tax break to be cut
- AuthorJoanne Sworder
One of the announcements in George Osborne’s budget – reducing the amount of tax relief landlords can claim on mortgage interest payments – was aimed a creating a ‘level playing field’ between homeowners and investors.
Given that buy-to-let properties now account for 15% of new mortgages, the announcement is aimed at addressing the concern that the current tax relief given to landlords gives them an advantage over homebuyers. The Bank of England has warned that this level of buy-to-let activity could pose a risk to the UK’s financial stability.
However, tax relief for those who rent out a room in their own home, effectively taking in a lodger, increases from £4,250 to £7,500. This means you can now rent out a room in your own home for up to £625 per month without having to pay any tax on the income.
A final point to note relates to the Support for Mortgage Interest Scheme, which currently allows homeowners to apply for their mortgage interest costs to be met if they become unemployed or their working hours are reduced if they are ill or disabled.
From 2018, that payment is to be changed from a benefit to a loan. The loan would be repayable either when the claimant sells the property or returns to work. There will be interest charged on the loan which will be linked to the Office for Budget Responsibility’s forecast for gilts. This change is predicted to save £270m and was described by the Council for Mortgage Lenders director as a “radical change” and “the most significant budget announcement for the mortgage market”.