Currently, buy-to-let landlords can deduct their costs, including mortgage interest, from their profits before they pay tax, saving up to 45% in some cases.
But in the summer Budget earlier this month, it was announced that the maximum tax relief landlords will be able to claim in future will be set at the basic rate of 20%.
This will be phased in over four years up to 2020.
The Chancellor said he was bringing in these measures because buy-to-let landlords have a ‘huge advantage in the market’ compared to other homebuyers.
And, ‘the better-off the landlord, the more tax relief they get’.
He also said this had led to the rapid growth in buy-to-let properties, which now account for over 15% of new mortgages.
Landlords were dealt a further blow after they were told that from next year they will no longer be able to claim 10% of their rent against wear and tear costs. Instead, they will only be able to deduct costs they actually incur.