Private landlords' judicial review of tax changes on rental properties rejected

From April, the extent to which individual landlords will be able to deduct mortgage interest and other finance costs from their rental income will be capped at 20%.

The same restrictions will not apply to corporate landlords and owners of furnished holiday lettings. A campaign group calling itself Axe the Tenant Tax argued that this had the potential to distort competition by giving corporate landlords an economic advantage.

However a judge ruled that their case was not strong enough to proceed to a full hearing, on the grounds that individuals and companies have always been treated differently under the tax system, according to the Financial Times.

"This raises political and economic questions but not a legal one," the judge said.

The two landlords that led the legal challenge, Steve Bolton and Chris Cooper, do not intend to appeal the judge's decision, according to Residential Landlords Association (RLA), which provided the individuals with support throughout their crowdfunded case. The RLA, National Landlords Association (NLA) and Axe the Tenant Tax group have all said that they will now lobby the government to reverse the planned policy at the Autumn Statement, or to restrict its impact to new borrowing only.

In a statement, Bolton and Cooper said that the court had "completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences" of the tax changes.

"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," they said.

"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," they said.

The change was introduced by the government as part of the Summer Budget in July 2015. At the time, it said that the ability to deduct mortgage costs from rental income "puts investing in a rental property at an advantage" over those purchasing residential property as their main home. Homeowners are not entitled to tax relief on mortgage interest payments.

Buy-to-let landlords will be subject to stricter affordability tests when taking out a mortgage on a rental property from January. They are also subject to an additional stamp duty land tax (SDLT) charge on the purchase of a buy-to-let property.