A report by the Intergenerational Foundation has cast a spotlight on how the UK’s tax system deals with buy to let investors.

The report maintains that £5.2bn of government money is used to ‘subsidise’ buy to let investors in the form of tax perks. Being able to offset mortgage interest payments and wear and tear against rental income, and the existence on certain loopholes that permit Capital Gains Tax avoidance – are some of the tax breaks that have drawn criticism in the report.

However, buy to let investors point out that they play an important role in providing private rental accommodation to the public.

Additionally, the principle that profit rather than turnover should be taxed would be overridden if these tax breaks were removed, it has been argued.

The biggest of these tax relief measures relate to mortgage interest, which can be offset against rental income. Private homeowners do not benefit from such a measure – not since the existence of MIRAS – Mortgage Interest Relief at Source, which was discontinued by Gordon Brown.

10 per cent of rental income can also be claimed by landlords for wear and tear, while Capital Gains Tax can be avoided if the property was the owner’s only or main residence at some point.

Critics argue that the buy to let industry is helping to fuel price rises and rents, while proponents point out the important function such investors play in the provision of housing in the UK.

Perhaps you are one of our buy to let insurance customers. What do you think about the assertions in the Intergenerational Foundation report? As ever, leave your comments below