The Chancellor has been warned that scrapping tax relief for landlords could add billions to rents.
In an open letter to George Osborne, National Landlords Association chief executive Richard Lambert asked for “assurances” that the Chancellor is not planning to scrap tax relief on mortgage interest for landlords in tomorrow’s Budget, as has been reported by some parts of the consumer press.
He argued that landlords not only support the housing industry and contribute to tax but provide “flexible accommodation which enables a dynamic workforce”.
The letter says: “It has been suggested that private landlords receive too many ‘perks’ or reliefs which give them an unfair advantage compared to owner-occupiers. This ignores the fact that letting residential property for profit is a business.
“Like any other business, landlords can deduct legitimate costs before declaring their taxable profit and the NLS is frankly dumb-founded at the notion that any private business should face the prospect of paying tax on their gross turnover alone.”
The NLA estimates that the aggregate costs in the private rental sector would increase by more than £2.6bn if the tax breaks were reclassified as non-deductible.
The letter adds: “Landlords would be left with no other option than to recoup their increased costs through higher rents.”
Association of Mortgage Intermediaries chief executive Robert Sinclair believes scrapping landlord tax relief could be a bigger problem for the market than the fallout from the Greek crisis.
He says: “I hope this does not happen. Everybody is writing big headlines about Greece but for me this would have a much bigger impact [on the UK housing market].”