The amount increased despite restrictions on the relief that landlords could claim on interest that they pay on mortgage, according to London estate agent Ludlowthompson.
Landlords can no longer deduct mortgage expenses from rental income to cut their tax bill. However, they can receive a tax credit of 20 per cent of mortgage interest payments instead.
The change has been phased in gradually since 2017 but is now fully in-effect, according to the estate agent.
Loan interest made up 37 per cent of tax reliefs claimed by BTL landlords, which is equivalent to £6.9bn.
This was followed by property repairs, maintenance and renewals at 24 per cent of total tax reliefs at around £4.5bn.
The estate agent urged BTL landlords to take advantage of available tax reliefs for upcoming changes to Energy Performance Certificate requirements. It states that all rental properties will have to have an EPC rating of C or higher.
Once the bill is passed into law, the changes will apply to new tenancies from 2025 and all tenancies from 2028.
Landlords should be mindful to ensure energy efficient improvements do not count as capital improvements as it would not then be eligible for tax relief.
Improvements like double glazing or a modern boiler would be permissible for tax relief as it falls under repairs, maintenance and renewals.
The estate agent added that landlords who have benefitted from an increase in rent may benefit further from investing that additional income in improvements.
Government should provide more tax reliefs to incentivise landlords
Stephen Ludlow, chairman of Ludlowthompson says that there are no specific reliefs currently available to help landlords improve the energy efficiency of their properties in time for the deadline.
“Landlords may be able to make careful use of the repairs, maintenance and renewal allowance to replace fixtures such as boilers with more energy-efficient models,” he said.
He added that there was a “strong argument” that the government should provide more generous tax benefits for property improvements as it would incentivise landlords to make upgrades, which would improve the overall housing stock and benefit the tenants too.
“Within an inflationary environment, BTL remains an attractive investment because landlords have the opportunity to increase rents in line with wage growth,” he explained.
In his Spring Statement, Sunak announced a removal of VAT payable on energy saving materials to encourage homeowners and landlords to make their homes energy efficient.
