Demands To Scrap Tax Relief For Buy To Let Landlords Increase
There is growing demands for the government to scrap the tax relief that buy to let landlords are able to claim on mortgage interest. At the moment landlords are able to deduct mortgage from their profits as happens with most other businesses.
According to the Intergenerational Foundation Lobby the tax relief claimed by buy to let landlords costs the treasury around £5bn a year. Most of the demands for the abolition of the tax relief are coming from left wing lobby groups who claim that the relief is given to landlords at a cost to young people who are trying to buy a home. They have said that the tax relief is a subsidy for the buy to let market and only benefits the property rich.
Landlords could face ruin if tax relief was scrapped
However it seems as though they have given little thought to the fact that the property market could collapse if this tax relief were taken away from the buy to let industry. Most landlords would probably face ruin as they would lose money on their investments and would be forced to sell.
This would cause havoc in the property market. You only have to look at what happened in June 1988 when the Chancellor decided to abolish MIRAS. This caused a slump in the market that caused a recession and costs hundreds of thousands of jobs. It also made a lot of people homeless and took 10 years for property prices to recover. There is no way that a Conservative government would ever consider removing mortgage tax relief.
Tens of thousand of people would be affected
If you own a business you are able to claim mortgage tax relief from your profits and the buy to let industry is a massive business. It employs hundreds of thousand of thousands of people directly and indirectly. Why would a government want to jeopardise this?
The other factor that needs to be taken into consideration is that tenants would suffer as landlords would not be able to afford to maintain their properties. The standard of rented accommodation would drop dramatically as landlords struggled to make mortgage payments. If you remove tax relief the buy to let market does not look very attractive at all. It is not just letting agents that would suffer. Builders, plumbers, roofers, cleaners, estate agents, accountants, would suffer, and the list goes on.
Pensioners would also be affected in any downturn
Many people have turned to the buy to let market in order to secure a reliable income stream. They have been turned away from the pensions industry because they have been ripped off with charges from the pension companies and financial advisors. Pensioners are also able to use their pension funds to invest in a buy to let. This is a good thing and must be encouraged. They are no longer forced to rely on greedy financial advisors who sell them annuities and earn huge commissions from insurance companies at huge costs to pensioners. They no longer have to put up with this.
Whilst many people hate the buy to let market and blame the dysfunctional property market and wider social problems on greedy landlords it would be a disaster to try and tackle it in this way.