Plans to subject buy-to-let landlords to costly additional tax on their mortgage interest payments are to come under challenge at the High Court this week.
The changes proposed in section 24 of the Finance (No.2) Act 2015 will stop buy-to-let finance costs, of which the main example is mortgage interest, being a claimable business expense. This in effect means that most landlords with mortgages will have to pay tax of 20% or more on their turnover rather than their profit.
The change will only affect individuals who own rental properties in their own names, like the millions of buy-to-let landlords in the UK. Companies and wealthy cash investors are excluded. The tax burden faced by individual landlords might wipe out or even exceed their actual profit.
Steve Bolton, founder of Platinum Property Partners, and Chris Cooper, a fellow landlord and airline cabin crew member, are taking the matter to court, seeking a judicial review of the legislation, backed by campaign group Axe the Tenant Tax. Cherie Blair QC will represent them at the High Court on Thursday.
They say it is an unfair tax that will distort market competition, increase rents substantially and only serve to make the UK housing crisis worse.
On its website, Axe the Tenant Tax says: “Most landlords will pay extra tax of 20% or more on their interest. The tax they pay might be bigger than their real profit, leaving them with a rental loss and a cash shortfall. And the tax will be payable even if they make a real loss, increasing the cash shortfall. HMRC will bankrupt those who cannot pay the extra tax.”
