The government has reasserted its commitment to changes to mortgage interest tax relief, fully introduced three years ago. Responding to a petition on the issue, it said that it will continue to set mortgage interest relief against rental income at the basic rate of tax.
The government says it recognises the important role the private rented sector plays in the economy but has a responsibility to make sure that the income tax system is fair.
More than 28,000 people have signed the petition urging ministers to reverse the Section 24 tax change. Prior to the changes, landlords could claim tax relief on mortgage interest according to their income tax band. This meant higher rate taxpayers received more generous relief than those paying the basic rate.
The change in the rules, which was introduced gradually from 2017 to 2020, means landlords can claim a tax credit for mortgage interest at the basic rate of 20%, regardless of tax bracket.
The government was obliged to respond to the petition once it reached 10,000 signatures. The petition remains open until 10 May 2023. If it passes the 100,000 mark, it is likely it will be debated in parliament.
The official response added: “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.”
Read more about this story on the Landlord Today website.