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14

2.3

Amending buy-to-let tax relief

The buy-to-let sector has taken off in the UK since the start of the millennium. While the share of UK

households that are homeowners has been on decline, the private rental sector has significantly

increased in importance. A

s Figure 6

below shows, home ownership rates have been trending down

since 2005, while the share of households privately renting has risen sharply from 12% in 2005 to 18% in

2012.

Figure 6: UK housing stock by tenure, %

Source: Department for Communities and Local Government

In part this reflects the rising cost of housing (a result of the UK’s chronic housing shortage) which has

made it more difficult for younger age groups to get on the property ladder. But it also reflects

government tax policy. While tax relief on mortgage interest payments (“MIRAS”) was abolished for

homeowners in 2000 – a tax relief which Gordon Brown reportedly described as a “middle class perk” -

the buy-to-let sector has retained tax reliefs which run into the billions of pounds. Freedom of

information requests made by the Intergenerational Foundation showed that, in the year 2010/11,

landlords enjoyed tax relief of as much as £5 billion. This tax relief is set to rise over the coming years as

private renting continues to grow in importance. When the Bank of England starts to raise interest rates,

mortgage interest relief for landlords will rise significantly.

0%

10%

20%

30%

40%

50%

60%

70%

80%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Owner occupied

Rented privately or with a job or business

Rented from housing associations

Rented from local authorities

© Centre for Economics and Business Research for the FairHomeTax Campaign Feb 2015 commissioned by Howard Cox