As George Osborne brings the famous red briefcase to the House of Commons once more for his latest Budget announcement, opinions have been severely divided.
While the increase in the national living wage to £9.00 by 2020 has been hailed as a real positive, the scrapping of student maintenance grants and cuts in various benefits have stolen headlines as people across the nation react negatively to the news.
As always, the Budget announcement has a far reaching effect, with people across a range of walks of life and industries feeling some sort of repercussion. So what does this summer’s Budget mean for those who are investing in residential property to let in the UK?
The chancellor said in Parliament that he will be putting a cap on the amount of tax relief property investors can claim on mortgage interest payments, which in theory will come as bad news to buyers nationwide.
At the moment, many are able to claim tax relief of up to 45 per cent, but in a move that will be phased in over a period of four years beginning in April 2017, the chancellor said the maximum level will sit at 20 per cent.
Currently, tax reliefs are calculated based on the rate of income tax the investor themselves pays. And with many falling into the top tax bracket, Mr Osborne said that such relief is costing the nation somewhere in the region of £6.3 billion per year.
On top of the cost, the chancellor said that the plan is to make sure there is a level playing field for investors and buyers. At the moment, he said, the market is unbalanced in favour of the former.
In his Budget speech, Mr Osborne said: “Buy-to-let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income, whereas homebuyers cannot. And the better off the landlord, the more tax relief they get.”
However, despite the rather negative tone of the announcement for investors, it should generally have little effect on the sector as a whole. The positive sentiment among landlords and investors at the moment will mean that many still want to expand their portfolios.
In addition, the private sector should still have room for manoeuvre in terms of rental prices moving forward as the economy continues to expand and people’s finances improve. It will mean that landlords will be able to compensate for the lost tax reliefs by increasing rental prices.