November 2023: As property rental prices reach record levels according to the latest ONS data, Purbeck Personal Guarantee Insurance is urging the Chancellor of the Exchequer, The Rt Hon Jeremy Hunt MP to reinstate the ability of landlords to set the full amount of mortgage interest against rental income, before tax is calculated. Currently, all of the rental income made from a property is taxed. Landlords can claim back mortgage interest costs but only up to the basic income tax rate of 20 per cent. The restriction of buy-to-let mortgage tax relief, also known as Section 24 can be avoided if a buy to let mortgage is taken in a limited company structure but this type of mortgage can be more expensive and often requires the landlord to sign a personal guarantee.
Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “It is now five years since Section 24 was introduced. While this was intended to slow down the growth of the private rental sector to help first-time buyers onto the property ladder, landlords are now facing huge mortgage costs due to interest rate rises and many are leaving the market. This has created a lack of supply pushing rental costs to record highs. Section 24 is having much wider consequences than was originally intended. We echo the calls being made for a return to mortgage interest relief for landlords. This would help increase supply in the private rental sector and with greater supply, rental costs should fall.
“A landlord operating in a limited company structure can offset 100% of the buy to let mortgage interest, reducing profits and the amount of tax paid. This is why we have seen a huge rise in buy to let mortgages take in limited company structures creating demand for personal guarantee insurance protection for Professional Landlords. But setting up a limited company isn’t right for everyone and it’s vital that private landlords are given the break they need to breathe life back into the private rental market.”