Skip to main content

Tax Allowances: Landlords

Question for HM Treasury

UIN 44101, tabled on 2 September 2016

To ask Mr Chancellor of the Exchequer, what estimate he has made of the number of private landlords who will be affected by the tax relief change to higher rate taxpayers announced in the Summer Budget 2015.

Answered on

12 September 2016

HMRC estimate that 1 in 5 landlords will pay more tax as a result of this measure.

Given that only a small proportion of the housing market is affected by this change, the Government does not expect these changes to have a large impact on rent levels or house prices. The Office of Budget Responsibility (OBR) also expects the impact on the housing market will be small.

The Government will double the housing budget from 2018-19 and has set out the most ambitious affordable housing plan since the 1970s to support working people in their aim to own their own home, together the measures in the plan amount to over £20 billion of investment in housing between 2016-17 and 2020-21.

The level of housing benefits is dependent on a number of factors such as, household and individual circumstances in regards to employment and household income, inflation and rents. The Government does not expect a large impact on rent levels from this policy, and any impact would be dampened in the short term due to other policy decisions. Therefore, the government does not anticipate changes to the overall level of housing benefits as a result. Nevertheless, the government will continue to monitor rental levels charged in the private rented sector.

Landlords are required to maintain their properties to a legal minimum standard. The reform to the wear and tear allowance means that all landlords will now be able to offset the costs of replacing furnishings in their properties removing the previous disincentive to do so. The Government therefore does not think that the changes to the tax rules will reduce standards for tenants.

Some landlords may face difficult decisions regarding their properties. This is why the Government has chosen to act in a proportionate and gradual way. Basic rate income tax relief will still be available on a landlord’s finance costs, the restriction will not be introduced until April 2017 and then it will be phased in over 4 years. This gives landlords time to plan ahead of the changes.

Answered by