The Chancellor of the Exchequer recently introduced a crackdown on mortgage interest tax relief. Whereas higher earners used to claim 45 per cent on their properties, this has been slashed to a flat rate of 20 per cent. Landlords on the lower end of the spectrum won’t be badly affected. Higher earners, however, will lose swathes in mortgages interest payments.
Why, I hear you ask, should we be concerned with higher earners losing out? Is it not their duty to pay more tax, and their luck to be wealthy in the first place? The answer is that the damage made to landlords’ assets could be offset to the tenants.
If a top-rate landlord loses out on their 45 per cent, they will have to mitigate their losses. The obvious port of call for this is the tenant’s wallet. Ever increasing rent prices are not a black-and-white case of greedy landlords; it is the result of needing to make up for this severe slash in their income. On the one hand, it is cruel to assume that tenants will fork out whatever they’re told to pay in rent. On the other hand, the competition is fierce, and sadly when one tenant cannot afford the property, another will take their place. In that respect, it is lucky that Yorkshire does not experience the same dog-eat-dog atmosphere as London.
With that in mind, some landlords are diverting the damage away from tenants, and using other methods to cover their losses. Shorter-term fixed rate mortgage deals can have lower interest rates, while other landlords have registered their portfolio as a limited company (meaning they pay the lower rate of corporation tax). Whatever the results of this, tenants should be eagle-eyed and cautious, and make sure they do not blindly acquiesce to a hike in rent. Start a dialogue, be assertive and make the landlord know you mean business. It is your right, and their duty, to treat the tenant with the integrity they deserve.