A new government measure restricting tax relief for buy-to-let landlords has spooked a number of investors, pushing shares down in property companies.
Housebuilders Barratt, Taylor Wimpey and Persimmon dropped to the bottom of the FTSE 100 after the Chancellor said the amount landlords can claim as relief will be cut to the basic rate of income tax – currently 20 per cent. The companies respectively saw around £350m, £290m and £270m wiped from their market value on the news.
The measure is set to cost landlords a total of £1.2bn by 2020, but the Government believes it will help to create a “level playing field” between landlords and homeowners.Phil Nicklin, at Deloitte said: “This measure will almost double the effective cost of borrowing for a taxpayer on the highest rate of tax.
“Currently interest payments of £100 only cost £55 after tax relief, but will cost £80 from 2020. A landlord who borrows at even a modest level might end up paying more in tax now than he makes in profit.”