Signs that landlords may see their tax bill reduced during the Spring Budget on March 6th have emerged from parliament following a question in the Lords.
Lord Taylor of Warwick asked HM Treasury Under Secretary Baroness Vere (main picture) what assessment her department had made of the impact on ‘small scale lettings’ by the current tax regime, which has significantly increased the tax landlords pay.
This is because since April 2020, landlords have no longer been able to deduct any of their mortgage interest costs from their rental income and reduce their annual tax bill.
Instead, landlords now receive a tax-credit, based on 20% of their mortgage interest payments.
In response to Lord Taylor’s question Baroness Vere pointed out that landlords also get a tax exemption of up to £1,000 a year because they have income from land or property and that many had benefited from higher income tax personal allowance thresholds.
Nevertheless, Vere didn’t dismiss the idea of more incentives for landlords, saying: “As with all aspects of the tax system, the Government keeps the tax treatment of property income under review and any decisions on future changes will be taken by the Chancellor in the context of wider public finances”.
Last week official data showed that the Chancellor’s wiggle room to make tax cuts had widened considerably to £20 billion following higher revenues from VAT receipts and lower spending.
Other areas where experts hope, and expected, the Chancellor will offer incentives to landlords include reducing or abolishing the extra stamp duty paid when buying BTL properties, and reducing VAT on the costs of updating properties to be more energy efficient. Let's hope they are right.