25th
Jan 2023
A PRS petition that has around 30,000 signatories calling for the government to reverse its Section 24 tax change which many see as unfairly punishing landlords, has been rejected.
The petition was started by Midlands landlord Simon J Foster and is on the parliament website, is calling for the government to reverse the Section 24 tax change introduced in 2017.
Due to the change landlords can now only able to deduct 20 per cent basic rate reduction from their income tax liability of their mortgage interest rate and it is now mandatory for all rental income tax has to be paid upfront.
The government has now responded to the petition as it has reached the 10,000 signature mark.
The official response says: “The Government will continue to set mortgage interest relief against rental income at the basic rate of tax. The Government has a responsibility to make sure the income tax system is fair.
“The Government recognises that the private rented sector plays an important role in the UK housing market and economy. However, the Government also has a responsibility to make sure that the income tax system is fair. Under the old system, residential landlords got relief on their finance costs (including mortgage interest payments) at their marginal rate of income tax, which meant that higher rate taxpayers got a more generous tax relief than those on lower incomes.
“To address this, and make sure that all residential landlords are treated the same by the income tax system, the Government phased in a set of reforms to restrict finance cost relief to the equivalent of the basic rate of income tax. The reforms mean that all residential landlords will now receive the same amount of relief. It also reduces the disparity in income tax treatment between homeowners and landlords.
“To minimise the impact on landlords who are affected, the Government chose to act in a proportionate and gradual way. It announced this change almost two years before its implementation. The restriction, introduced in April 2017, was phased in over four years to give landlords time to adjust to the changes.
“To be clear, these reforms do not mean that tax relief on mortgage interest has been abolished. Landlords are still able to claim an income tax reduction equivalent to basic rate tax relief on the finance costs of their rental property. Residential landlords also continue to be able to claim relief at their marginal rate of income tax on the day-to-day costs incurred in letting out a property, such as letting agent fees and replacing furniture.
“The Government understands that people, including those who rent property, are worried about the cost of living challenges ahead. That’s why decisive action has been taken to support households across the UK, whilst remaining fiscally responsible.”
For the government to be obliged to, although not guaranteed, to hold a Parliamentary debate, the petition must reach 100,000 signatures by its closing date of May 10th.
To sign the petition
click here.
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