The Government has officially responded to a Parliament petition launched by the Residential Landlord’s Association. The petition seeks to challenge Chancellor George Osborne’s plan to reduce landlords’ ability to offset mortgage interest payments from their tax liabilities which were announced in the 2015 Summer Budget and Autumn Statement.
The petition titled “Reverse the planned tax relief restriction on ‘individual’ landlords” claimed that the Chancellor’s proposals to limit Mortgage Interest Relief for landlords operating as sole traders would unfairly impact their ability to conduct their business. Moreover the lobbyists claim that such restrictions are not denied to sole traders in other industries.
The Government responded officially after the motion obtained more than ten thousand signatures stating that it is committed to a fair tax system so it is “restricting tax relief landlords can claim on property finance costs to the basic rate of income tax.” Furthermore, the government asserts that the ability to reduce tax liabilities by offsetting mortgage interest and other finance costs against their property income is not available to ordinary homebuyers and those investing in other assets such as shares.
“By restricting finance cost relief available to the basic rate of income tax (20%) all finance costs incurred by individual landlords will be treated the same by the tax system. This recognizes the benefits to the economy that investment in property can bring but ensures the landlords with the largest incomes will no longer benefit from higher rates of tax relief.”
The government also states that the measures will only be introduced gradually over four years starting in April 2017 which will give landlords sufficient time to adapt to the new rules.
According to petition guidelines, a motion will be considered for debate in Parliament if it achieves over one hundred thousand signatures.