Private landlords lost their court challenge against the proposed tax changes to buy-to-let properties today.
The landlord group, which was led by QC Cherie Blair, argued that the changes were both “unfair and unlawful”, and that the case should go to a full judicial review hearing.
However, Mr Justice Dingemans ruled the challenge “arguable” and dismissed it in the Administrative Court.
The changes proposed in Section 24 of the Finance (No.2) Act 2015 will stop buy-to-let finance costs – largely mortgage interest – being a claimable business expense.
Most landlords with mortgages will now have to pay tax on their turnover rather than profit.
The amount of mortgage tax relief they can claim will also be cut from 45% to 20% from 2017 to 2020.
Blair represented Steve Bolton, chairman of Platinum Property Partners, and landlord Chris Cooper on behalf of the Axe the Tenant Tax coalition.
She said: “The court’s decision that our clients’ legal challenge should not proceed is very disappointing.
“Steve and Chris, and many others, have dedicated a lot of time and energy into putting forward the best case possible.
“We know the case has been supported and followed with interest by a large number of individual landlords. Many of these landlords now face challenging times ahead.
“From the outset, the legal process was just one aspect of our clients’ fight against this unfair measure.
“Together with their impressive and growing coalition, they will continue to engage with the government, and the legal team wishes them every success.”
The tax change will only affect individuals who own rental properties in their own names, like the millions of smaller landlords in the UK.
Companies owning buy-to-let property and wealthy cash investors are excluded from the tax.
In a joint statement, Mr Bolton and Mr Cooper said: “We are outraged by the court’s decision today. It has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24.
“From April 2017 the negative impact of this previously failed tax experiment from Ireland, where rents increased by 50% over a three year period, will be felt far and wide.
“Sadly it will be tenants who are hit hardest; they are set to see unprecedented rent increases over the coming months and years, which will be a very clear and direct consequence of this ludicrous legislation.
“For many, it will also mean the loss of their homes because vast numbers of landlords will be forced to exit the market.
“Hard-working, responsible landlords will have their pension plans in ruins, but the large corporations and the wealthiest in society, who can buy property without the need for mortgage finance, are systematically excluded from this unfair tax policy.
“Now that the legal route has run its course, we will be focussing 100% of our attention and resources on taking our case more forcefully, more powerfully and more directly, right to the heart of government. Our goal is simple: to abolish this tax or to remove the retrospective nature of it.
“We will be launching a range of lobbying, media and grass-roots activism measures over the coming days and weeks.
“We will also be encouraging all of our landlords to write to their tenants if they have to increase their rents or sell up, clearly explaining that it is this Conservative tax policy that has forced them into this situation.”
Axe the Tenant Tax is a crowd-funded coalition of individuals and organisations who represent more than 150,000 landlords.