Chancellor could announce changes to property tax affecting buy-to-let landlords

A new report released last week aimed to place a figure on the total sum of tax reliefs currently claimed by buy-to-let landlords.
 
Think-tank, the Intergenerational Foundation, used data obtained via a Freedom of Information request submitted to HM Revenue and Customs (HMRC) to estimate that private landlords had claimed £13bn in allowable expenses offset against rental fees.
 
The most significant tax relief for landlords letting property at present relates to mortgage interest, which landlords can deduct from rent before calculating the tax due.
 
This means that, depending on the rate of tax on each individual buy-to-let landlord, the overall value of tax currently forfeited by the Exchequer stands at £3bn - £5bn.
 
The report, which unsurprisingly gained support from organisations supporting tenants and first time buyers, called for tax reliefs to be scaled back for private landlords. It states that their "favourable" tax treatment "contributed to rising house prices and sharpened economic inequalities".
 
Nevertheless, any immediate changes to tax reliefs for buy-to-let landlords would court significant uproar. The very reason buy-to-let has grown in popularity in recent years – apart from its impressive returns – is that other long term investment schemes, such as pensions, have been watered down by official policies.
 
On the whole, private landlords are treated largely the same as any other business, but differ in two key areas. Where their properties are furnished, landlords can claim a "wear-and-tear" allowance equivalent to 10 per cent of annual rent.
 
The second area of relief relates to capital gains. An existing provision allows property owners to exclude the last three years’ ownership from capital gains tax providing the house has been the "main residence at some point".
 
While an entire overhaul of buy-to-let tax relief seems unlikely from Chancellor, George Osborne during today’s Autumn Statement, the Chancellor is expected to introduce capital gains tax on properties owned by non-residents. Other changes could see adjustments to stamp duty lower down the scale.
 
To keep abreast of developments during today’s Autumn Statement, why not follow our live Twitter feed @TaxAssistUK or visit our updates page for a summary of the key announcements.

Date published 5 Dec 2013 | Last updated 5 Dec 2013