The mortgage industry has reacted angrily to the Institute of Directors’ call to scrap the buy-to-let tax break.
The lobbyist’s policy paper, entitled, Encouraging Savings: A Better Tax Regime, is aimed at providing an attractive scheme for the taxation of savings on a sustainable basis.
The IoD says this would require a series of measures designed to remove distortions which currently exist in the taxation of savings products and some changes would be nee-ded to the treatment of physical property.
The IoD says the ability of BTL investors to deduct interest from rents could be withdrawn. Interest not allowed in computing the tax on rental income might then be allowed as a deduction from the capital gain when the property was eventually sold or it might not be allowed at all.
The idea would be to level the playing field between investors in buy to let and investors in other assets.
But Property for Life managing director David Austin warns if the BTL tax break is removed, the damage of landlords leaving the private ren-ted sector would affect the wider community.
He says: “The private rented sector is an essential part of the property market, fulfilling the high and increasing demand for rented accommodation and taking up the slack on social housing, ensuring that those who cannot afford to buy have somewhere to live.
“The proposed shake-up of the tax regime on savings would not level the playing field between property investors and investment in financial assets but would tip the balance in the other direction. People are increasingly putting their savings, including pension provision, into property rather than tradit-ional savings products which have historically offered poorer returns.
“As a result, the financial services industry has suffered a lack of confidence and is only looking to address its own interests with these changes.”