Landlords enjoyed a record £14bn of tax breaks in 2013, according to figures revealing the expansion of the UK’s buy-to-let market in the aftermath of the financial crisis.
Some £6.3bn was declared against the cost of mortgage interest alone in the 2012-13 financial year, according to information obtained by the Guardian from HMRC through a freedom of information request.
The figures also reveal that the number of landlords has increased by more than one third over the past six years. In the 2012-13 financial year, 2.1 million taxpayers declared income from property, up from 1.5 million in 2007-08.
The anti-homelessness charity Shelter has called for the government to conduct an “urgent review” of the tax treatment of landlords, who can also deduct the cost of insurance, maintenance and repairs, utility bills, legal fees and other expenses from their income. Owner occupiers are not entitled to the same privileges.
In response to the figures, Campbell Robb, Shelter’s chief executive, said: “In the context of looming welfare cuts and a dramatic shortage of homes, all those struggling to keep up with sky-high housing costs will be shocked to hear that a massive £14bn has been given in tax breaks for landlords in just a year.
“A fraction of this amount would go a long way towards fixing our housing shortage, and giving millions of priced-out families and young people the chance of a stable home.
“In the Queen’s speech the new government must start to set out a comprehensive plan that will finally build the homes this country desperately needs, and an urgent review of these huge tax breaks must be part of this.”
The £6.3bn write-off for the cost of paying interest on a buy-to-let mortgage is the largest of its kind since the Bank of England cut interest rates to 0.5% following the 2008 financial crisis.
Mortgage interest relief at source, or Miras, was introduced in 1983 for ordinary homeowners to encourage home ownership, but was abolished in 2000 by then chancellor of the exchequer Gordon Brown, who described it as “a middle class perk”. However, landlords continue to be able to claim mortgage interest as a business expense. Critics of the expanding buy-to-let market have long warned that such tax breaks give landlords a considerable financial advantage over ordinary homeowners.
Seb Klier, policy manager of Generation Rent, which campaigns for the rights of those privately renting, said: “When you get a taxpayer subsidy to borrow money, it’s no surprise that more people are choosing to invest in property instead of, say, buying shares in companies, which actually create jobs.
“The tax system also puts landlords at an advantage over potential owner occupiers when competing for the limited supply of houses, and it’s those thwarted first time buyers who end up paying off the mortgage anyway in rents.
“We need to stop subsidising property investment and use that money to build more homes instead.”
Richard Lambert, chief executive of the National Association of Landlords, denied that his members enjoyed unreasonable tax privileges.
“Letting out property is a business like any other, and is therefore treated and taxed as such, rather than as an investment,” he said. “Landlords are required to pay tax on the profit they make, and like any other business, are entitled to offset their costs incurred from the day to day running of the property against tax. They don’t receive any special subsidies compared with other businesses.”
Lambert said successive governments believed treating landlords as businesses encouraged better practice across the rental sector, and said NLA research had found 23% of landlords with a single property either broke even or made a loss.
“To discriminate against landlords and remove these reliefs, which are offered to other businesses, would cut a swathe through their profitability calculations and prompt many to sell up and invest elsewhere. That would mean even higher rents for those forced to chase after a shrinking pool of rented housing,” he warned.
Data from the Council of Mortgage Lenders indicated that landlords were granted nearly as many mortgages as first-time buyers in January.
In April, analysis by Wriglesworth Consultancy for the lender Landbay found landlords had enjoyed returns of 1,400% since 1996, far in excess of the rewards offered by shares, bonds or cash.
