Tax breaks add £14 billion to landlord buy-to-let income boosting the sector while first time buyers are priced out of the market.

Figures from HM Revenue & Customs reveal the number of buy-to-let landlords have increased from 1.5 million in 2008 to 2.1 million in 2013 receiving £14 billion in tax breaks and expanding the sector at the expense of home ownership in Britain.

First time buyers are struggling to get on the property ladder with rising house prices, a shortage of new builds homes and having to compete with landlords.

Buy-to-let landlords claimed £6.3 billion in tax relief for their mortgage interest in the 2012-13 financial year according to HMRC.

Landlord numbers increasing

The figures show the number of landlords that have declared in from property increased by 40% from 1.5 million in the 2007-08 financial year to 2.1 million in 2012-13.

In contrast home ownership in the UK has reduced to 65.2% compared to 71.0% in 2003 and the lowest level in 25 years according to the English housing survey.

The number of private rented homes has increased from 2 million in 1980 to 3.9 million in 2013 of the country's 22 million homes.

More competition from buy-to-let investors has restricted first time buyers and home movers and it may be easier for remortgage buyers to stay in their existing home to save more for a bigger deposit.

In contrast there are increasing numbers of equity release buyers accessing money in their property with a lifetime mortgage to improve their quality of life or reduce inheritance tax owed by your beneficiaries.

Since the financial crisis there has been a fall in the number of owner-occupiers by half a million from a high of 14.8 million. This was due to the reduction in the availability of mortgages from lenders.

Landlords tax savings increases

Buy-to-let landlords are allowed to deduct a wide range of expenses from the rental income they receive from their properties before paying tax.

Letting property is treated as a business rather than investment and Landlords are taxed on the profit and are entitled to deduct the costs like any other business.

The largest allowable expenses are loan interest and other financial costs at £6.3 billion and property repairs and maintenance at £3.0 billion.

Other expenses deducted amount to a further £5.0 billion including legal & professional fees, ground rents, insurance, costs of services provided, utility bills, cleaning and gardening.

Critics have said deducing these costs give buy-to-let landlords a significant advantage over ordinary homeowners such as first time buyers and home movers when competing for a limited supply of houses on the market.

Even though landlords receive these tax breaks, the National Association of Landlords has said that 23% of landlords with a single property either broke even or made a loss.

What are your next steps?

Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.

Learn more by using the mortgage cost calculators, property value tracker chart and equity release mortgage calculator. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to spend on home and garden improvements, holidays or even buy a more expensive home.

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