The Government has now changed the rules that allow property investors to claim interest on loans as an expense against their income and gone to great pains to ‘convince’ us all that by doing so they are simply ‘removing a loophole’ being exploited by investors. The law as it stood allowing a property owner to claim loan interest was NEVER a loophole. The Government’s rhetoric around this is just political spin and fluff. The ability to treat interest for tax purposes is an internationally accepted tax practice and has been for as long as anyone can remember. Interest deductions on residential property acquired on or after 27 March 2021 will not be allowed from 1 October 2021. Interest on loans for properties acquired before 27 March 2021 call still be claimed as an expense but the amount able to be claimed will reduce over the next 4 years until it is completely phased out. Other than Labour and Green politicians it’s hard to find any support for this change. It will impact on existing investors and those looking to invest in the future, so it has the potential to see a marked drop-off in investor activity with some even choosing to sell existing highly leveraged investment properties. To all investors we would say ‘don’t panic’ there’s a bit of water to go under the bridge yet and new builds will be exempt from the policy. But what qualifies as a ‘new build’ built before 27 March 2021 is yet to be determined. We’ll leave the last word on this flawed policy to well-known property commentator Ashley Church. “Neither this measure, nor any of the others in the Government’s announcement, will make the slightest bit of difference to house price inflation. Prices will continue to rise and the latest ‘suite of measures’ will become just another footnote to a long list of failed policies”. Thanks Ashley, we couldn’t have put it better.
Lets talk about loopholes National Propertyscouts
Wikipedia describes a ‘loophole as follows - A loophole is an ambiguity or inadequacy in a system, such as a law or security, which can be used to circumvent or otherwise avoid the purpose, implied or explicitly stated, of the system.