Colin Cloy, an Independent Financial Adviser for IHT Free in West Sussex said housing is overvalued by 20% which is both excluding first-time buyers and forcing up rents. He urged the government to abolish tax relief, which he said would straighten out a “distorted” housing market.
“This will undoubtedly create a “panic” in the BTL market which I believe will force many landlords to sell,” he said.
Individuals and corporations with BTL portfolios will face large losses and are likely to lobby hard to maintain the benefit, he said, however, he added the recommendation has considerable support from the wider public.
Cloy added that homeowners would see their property values fall, but the market will recover as soon as first-time buyers can afford to buy and inject fresh life back into the market.
“My recommendation I believe will also greatly assist the Treasury by removing an unnecessary tax concession to a small but wealthy section of the public who have utilised this anomalous tax break,” he added.
Landlord tax breaks include Capital Gains Tax and income tax relief on mortgage interest, rental insurance, property maintenance, lettings agency fees and 10% depreciation of the cost of furnishings.
However, David Whittaker, managing director of Mortgages for Business said landlords don’t get tax relief, but as a legitimate business property owners can offset business interest and expenses against tax.
He continued that private landlords are filling the void left by the previous government which had a housing policy but no money to spend and now, this government which he said “has no housing policy at all.”
“Private landlords are fulfilling a major role in both the private rental and the social housing market. They are providing the social housing that no government can afford at the moment. If you put thousands of tenants out on to the street, where will they go? Council housing? – there’s no council housing being built,” he added.
