Tax relief for BTL investors to be reduced

In what Osborne promised would be  'proportionate and gradual' action, the governemtn will now restrict mortgage interest relief on residential property to the basic rate of income tax for buy-to-let investors.

Osborne 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. For the wealthiest, every pound of mortgage interest costs they incur, they get 45p back from the taxpayer.

"All this has contributed to the rapid growth in buy-to-let properties, which now account for over 15% of new mortgages, something the Bank of England warned us last week could pose a risk to our financial stability. So we will act – but we will act in a proportionate and gradual way, because I know that many hardworking people who’ve saved and invested in property depend on the rental income they get."

Alex Hammond, Kensington Head of Market and Communications, said:

“The cut in mortgage interest tax relief to the basic rate for buy-to-let investors should concentrate the minds of anyone planning on becoming a landlord.

"Everyone likes a generous tax break but the reality is that landlords should not be investing simply for the tax relief and that remains the case after the Budget announcement. As the Chancellor said buy-to-let has been a massive success story and that should remain the case even after the Budget. Specialist lenders are committed to the market and there is still a strong case for expansion.”