George Osborne announced at the beginning of the month, that the mortgage interest tax relief for buy to let home owners, is to be restricted to the basic rate of income tax, currently sitting at 20%.
So what will this mean for all the property investors who have built a large portfolio of rental properties or for those who wish to embark on the buy to let journey and build their own property empire?
The chancellor has stated that this measure will address the unfairness in property taxation, and will be phased out to all landlords gradually during 2017. At the moment buy to let landlords have a big advantage as they are able to offset their mortgages interest payments against their income, homebuyers are not able to do this so are at a disadvantage.
The rapid growth in buy to let properties, which now account for 15% of new mortgages could pose a risk to the countries financial stability, according to the Bank of England. However this reduction in tax breaks for buy to let investors could also discourage new landlords from entering this sector, resulting in a lack of rental stock. The knock on effect of this will be higher rental prices to tenants as landlords will need to compensate for this loss of income.
The chancellor has reassured a worried sector that changes will be made in a gradual and proportionate way, the hardworking people who have saved and invested in property depend on this income, so to enforce the change fully now will impact badly on those who rely on this pot of money as a retirement or early pension plan.