Finance Bill

Written evidence submitted by Malcolm Smith (FB 44)

I am a landlord with 5 properties in London and I am very worried about the Government’s plans to restrict mortgage interest tax relief on individual landlords. I believe the Government is wrong in its thinking that this relief gives landlords an advantage over home owners and I further believe that it breaks a fundamental business rule that costs, such as mortgage interest, are a business cost and should be taken out of income. I think that implementation of this policy will pose a serious threat to the amount of rental property available to tenants which will have the knock-on effect of increasing rents.

Landlords are currently able to offset all their finance interest against their rental income, before calculating their rent profits and therefore their tax bill. This is quite normal in business as the general taxation principle is that tax is applied on profit and not revenue.

The Government proposes to break this normal taxation practice and require us to pay tax on part of our costs. This is a big change and I face having to pay a substantially larger tax bill even though my revenue has remained unchanged.

No other business is taxed in this way. No other business is taxed on interest on loans taken out to buy assets that generate taxable income. I believe that individual landlords who provide valuable housing across the UK are being unfairly discriminated against by the Government.


1. Mortgage interest is a legitimate business cost and should be treated as any other business expense.

2. This tax does not distinguish between revenue and profit. Mortgage interest is not income, it is a cost and so you should be allowed to deduct it from your revenue to find your taxable income.

3. As interests rates rise this means taxable income will rise, however, total income will not rise. This is unfair on landlords and does not meet with the spirit of taxation which says that it should be fair and proportionate.

4. This policy will increase my costs substantially and I will have to increase my rents to cover the shortfall.

5. The tax rate payable could rise above 100pc, meaning that more than all of my profit is paid in tax;

6. This degree of tax could push landlords into loss, making their investment financially unviable and forcing them to increase rents sharply – or sell.

7. Home buyers are not at a tax disadvantage compared to landlords. When home buyers sell their properties they are not subject to capital gains tax unlike landlords. Also buying a home to live in is not business – I don’t expect to have any tax deduction in relation to the interest I pay for my own home.

8. Landlords have filled a vacuum created by the lack of housing being built by the private and public sector. They have provided a valuable source of housing for the UK.

9. It is unfair to impose this change on landlords as when they decided to go into business and considered their financial situation, the mortgage interest was tax deductible.

September 2015

Prepared 18th September 2015