Summer Budget: Buy to let & rent a room
Buy to let relief change a ‘shocking decision’
The chancellor is removing one of the most abused tax allowances, and severely clawing back another. Landlords at present are allowed to deduct 10% of the property income for “wear and tear” on each property they own without having to produce a single receipt to prove they have actually maintained the property. From April 2016 landlords will have to produce receipts if they want to offset upkeep and repairs against their tax bill.
On top of this, the level at which landlords can claim mortgage interest rate relief will be capped at the basic rate from April 2020 and the reduction from 40-45% will begin in April 2017.
There are around 368,000 privately rented properties in Scotland who may be hit.
Responding to the announcement, John Blackwood, Chief Executive of the Scottish Association of Landlords said: “This is a shocking decision by the Chancellor of the Exchequer which unfairly discriminates against landlords who provide valuable housing across Scotland.”
However, David Alexander of eponymous letting agent DJ Alexander was more measured: “Most of today’s landlords are not fat-cats but wage-earners or pensioners for whom buy to let is an attractive income stream during a long period of historically-low interest rates. Clearly, however, some landlords who are higher-rate taxpayers may need to reconsider their position.”
There was good news though for Scots who rent out a room in their home to a lodger. The rent-a-room relief which has been frozen for almost 20 years will be raised from £4,250 to £7,500 in 2016.
Matt Hutchinson, director of flat and house share site SpareRoom.co.uk welcomed the news: “The Chancellor’s change to the rent a room scheme has potentially huge implications for the scarce supply of affordable rented accommodation.
“In the midst of a housing crisis, and with building levels behind all forecasted targets, it’s vital we make better use of existing stock and this will do just that. All too often housing initiatives benefit a select few – but this helps millions of renters and homeowners.”
There are an estimated 19 million homes in the UK with a spare bedroom which could potentially be let out and across the country the average rent for spare rooms is £6,071 a year.