Should landlords sacrifice buy to let tax breaks?

Debates over whether buy to let landlords should still benefit from tax breaks - which accounted for £14 billion in 2013 - continue in the face of austerity

Ian Cowie, writing in the Sunday Times, revealed that he is breaking the habit of a lifetime by pushing for tax rises rather than a cut.

Named financial commentator of the year at the recent Headlinemoney awards, he questioned whether it is finally the right time to look at the buy to let market.

“At a time of austerity, when cuts must be made in many areas we may wish to support, this raises serious questions about whether investors in bricks and mortar should continue to receive unlimited mortgage interest relief 15 years after it was withdrawn from homeowners,” he wrote.

It is suggested that landlords receive tax breaks in the region of £10 billion and Mr Cowie’s call comes ahead of the extra Budget announcement due from Chancellor George Osborne on July 8th.

Mr Cowie suggests that the situation could trap people in the rental sector and that lowering tax deductible expenses could bring about improvements.

Among the deductible expenses that can be claimed by buy to let landlords are mortgage broker and arrangement fees, letting agent fees, any tenant management costs, mortgage interest and insurance premiums for buildings and contents cover.

Other costs, including those relating to managing a buy to let such as maintenance, providing furniture, service charges, council tax during void periods also fall into this category.

Campaigning charity Shelter has suggested that tax breaks for the financial year in 2012-2013 amounted to £14 billion, with £6.3 billion of this a tax relief against the cost of mortgage interest.

Mr Cowie is not the only person to speak out on buy to let mortgage interest tax breaks either as Simon Lambert in the Daily Mail has also covered the subject.

Mr Lambert suggests that removing tax breaks for buy to let could be “one way out of the austerity corner” that Mr Osborne is in.

While describing the ability to offset mortgage interest against taxable rental income as a “very handy weapon” for buy to let landlords he queries why such options are no longer available to others in the housing market.

Much of the debate on the subject surrounds whether buy to let is viewed as a business or as an investment.

Mr Lambert states that he understands both sides of the argument but suggests that the Government may now be set to act as it looks to manage the nation’s finances.