The Chancellor George Osborne announced in his Budget speech that from 2017 buy-to-let landlords will no longer enjoy the amount of tax relief on their mortgage interest payments, as it is being cut down to the basic rate of income tax - 20%. Read PIMS Budget review

• Tax Relief on Buy to Let mortgage to be reduced to 20% by 2020
• Wear and Tear Allowance to be replace APRIL 2017
• Housing Benefit allowance reducing to £20,000 (£23,000 in London).
• Rent-a-room scheme allowance increases to £7,500 from £4,250
• Welfare Reforms and Minimum wage  – Negative impact on Landlords
• Renting to young people - New restriction under 21
• Support through Child Tax Credit will be limited to 2 children for children born from April 2017.
• From April 2016, Housing Benefit claims will be backdated for a maximum of 4 weeks

Read PIMS Budget review

Mr Osborne stated that his decision was taken to create a "level playing field" for home owners and buy-to-let  investors and that the change will be rolled out over a four year period starting April 2017.

The reduction in tax relief will certainly hit the larger investors as at present the amount of tax relief claimed is “mirrored” by how much tax is paid, up to 45%. The chancellor said that the current tax incentives give landlords "a huge advantage in the market", in comparison new home buyers.

George Osborne added: "The better-off the landlord, the more tax relief they get.”

Already estate agents are forecasting reductions of numbers of buy-to-let landlords entering into the market which will see less privately rented homes becoming available, adding to the housing crisis.

Nicholas Leeming, chairman of one of the estate agent groups, said: “This a major blow to a sector that is heavily reliant on private investors and who provide a crucial supply of property to the private rental sector.”

Ed Heaton of another estate agent, said: “The changes to mortgage tax relief for buy-to-let landlords will particularly hit those owning properties in prime central London, where the sums involved are very high and the yields extremely low.

 

“If one accepts the Bank of England’s arguments, then the proposed changes are probably a proportional response to the issue.

“It might even help release a little more prime stock in central London to the market in the next year or so, although this might be wishful thinking.”

The chancellor also detailed his plan to increase tax relief to homeowners who rent out a room in their houses, of up to £7,500 starting in April 2016.

Richard Merrick of PIMS says: “This is a major blow that could impact on the numbers of houses being built if potential landlords feel it is not worthwhile to enter into the market.

“The new measures are not being introduced until 2017 which hardly sweetens a very bitter pill. Regarding new builds, as landlords account for 15% of mortgages, it could have a real impact on numbers of new developments being undertaken.

 

"We have just heard that shares in the house building firms Barratt Developments, have fallen by 4.8% and Redrow by 1.5% following this announcement.”
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