Forman & Son MD Lance Forman supports the tax changes for buy-to-let investors

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- Credit: Carmen Valino - on shift

I don’t always agree with George Osborne, but last summer our chancellor changed the way buy-to-let investors are taxed.

The new rules coming soon will be most burdensome for investors with mortgages.

At the moment, if you buy a flat for £100,000 and rent it out for £5,000 per year, you would have to pay tax on the £5,000 rent. However, if you borrowed £80,000 to buy the same flat and paid interest of say £3,000 per year, then you could offset the mortgage interest against the rent and only pay tax on the £2,000 profit.

Consequently the government is subsidising buy-to-let investors and has now decided that this is not a good use of public money.

What is quite paradoxical is that left winger Cherie Blair is now defending the investors and contesting Osborne’s decision claiming it infringes landlords’ human rights.


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This is because if the properties are owned by property companies rather than invidual investors, those companies would still be able to continue using the mortgage relief.

Many small buy-to-let investors are up in arms, not unreasonably, as their investment decisions were based on a world which is different from what the chancellor has planned and many may end up having to sell their properties or increase rents. No one quite knows how the letting market will be affected.

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But Osborne is right in this case. Buy-to-let investors are precisely that; investors. They usually have other occupations, or may even be retired savers. Why should the public have to subsidise their investments?

I have never invested in buy-to-let properties, but I have invested in the stock market.

It would be wonderful if the tax man allowed me to borrow money to invest in shares, or wine, or art, and allowed me to offset the cost of the interest against tax. Wonderful for me, but not great for the taxpayer.

Buy-to-let investors have had it good for a long while and now that their party is nearly over, they are begging for the show to go on. If they do want it to continue, they should pack up their day jobs and set up full time property businesses and pay corporation tax on any profits they make. More from Lance

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