Budget 2017 was a well-flagged ‘something for everyone in the audience affair’ but changes in mortgage interest relief for landlords was a relatively welcome, if small, measure.
Many of my clients are landlords and contrary to some preconceptions of them being a privileged sort of gentry class from time’s past, the reality is different.
In fact many have struggled to realize even a basic return from their business activity (and many of this cohort were ‘accidental landlords’ forced into renting out their property due to adverse economic circumstances).
The change is to the effect that mortgage interest relief for people who rent out their properties will be brought back to parity (i.e. 100% allowable against income tax) with ordinary residential borrowers.
However this measure will only be phased in over five years, so the relief increase will be only be from the current 75% going to 80% this year into and stepped adjustments in the following four budgets (assuming of course that these will be adhered to).
As part of my 2016 submission to the Government on behalf of the Residential Landlords’ Association of Ireland we had lobbied as for this change;
4. Restore the loan interest as a 100% fully deductible expense
The restriction to 75% is a major deterrent to people considering investing in buy to let residential property. It does not apply to commercial property and therefore this discourages investment in the residential sector.
The effect of the reduction of the allowable portion results in landlords effectively paying income tax, USC and PRSI on amounts that are not profits.
RLAI recommend full restoration of interest as a fully deductible expense and the removal of this restriction would immediately benefit the housing crisis due to increased investment in the sector.
Other changes that I had sought in the RLAI 2017 submission such as changes to the treatment of PRSI and property tax have not yet been accorded parity of treatment as with other business sector expenses.
That said there is some succor for stressed out landlords…albeit possibly nullified if you are on sixty Major a day 😉
Embedded below is a snapshot of the Budget 2017 measures;
You can also download the PDF here