Chancellor Philip Hammond delivered his first Spring Budget with a few controversial measures, such as raising National Insurance contributions for the self-employed and a new soft drinks levy on sugary drinks. Although he did not have any new nasty surprises for the rental sector, he failed to reverse the unpopular tax reforms introduced by the previous Chancellor, George Osborne. This was despite pressure from the very people affected by these changes – buy-to-let landlords, housebuilders and estate agents.

The good news is that he did not introduce any further property taxes, although the increase in National Insurance for the self-employed is expected to affect about 20% of landlords and self-employed agents, while those with a buy-to-let portfolio could be affected by changes to corporation tax and dividend allowances. That means from next month, buy-to-let investors will pay additional stamp duty and see a reduction in mortgage interest tax relief, which will be gradually reduced to 20% in 2020. For a landlord paying 40% tax, this will have a serious financial impact. For example, if a buy-to-let earns £20,000 and the interest-only mortgage payments are £13,000 a year, at present tax is only paid on the difference. That equals £2,000 tax. Looking at the same scenario from 2020, tax is now due on the total rental income of £20,000 minus a tax credit equivalent to the 20% basic rate of tax on the interest. Therefore, you would now pay £5,400 in tax.

For landlords who set up limited companies to benefit from the full mortgage interest relief, the Chancellor announced that the tax-free dividend allowance for company directors will be cut from £5,000 to just £2,000 from April next year. Self-employed landlords will pay an extra 1% in Class 4 NIC from April 2018 and another 1% hike the following year. However, corporation tax will be lowered to 19% from April, which makes buying property through limited companies more attractive, especially as the tax will drop to 17% in 2020.

Obviously, the budget has disappointed those working within the rental sector. National Landlords Association Chief Executive, Richard Lambert, said the Chancellor has given up a chance to act on suggestions on easing the impact of the changes in mortgage interest relief for landlords. He added that it only seems as though Mr Hammond will change his mind when the consequences of these actions kick in.

There is no disputing the fact that Britain is facing a housing crisis, as more people are unable to afford to buy, while there is a lack of adequate rental properties in many towns and cities, particularly in areas of high demand, such as London and its commuter belt. By making the buy-to-less sector less attractive as an investment, the government may find it has caused even more problems. As Cornerstone Tax principal consultant, David Hannah, pointed out, real estate represents 21% of the economy. Therefore, it seems strange to create a further tax burden on people investing in this vital sector.