Removal of interest tax relief for Buy-To-Let mortgages (P.51/2026): comments

STATES OF JERSEY

REMOVAL OF INTEREST TAX RELIEF FOR BUY-TO-LET MORTGAGES
(P.51/2026): COMMENTS

Presented to the States on 19th March 2026 by the Minister for Treasury and Resources

STATES GREFFE

2026  P.51 Com.

COMMENTS

Following amendments to the Government Plan 2024-2027, the Assembly agreed in 2023 to examine whether mortgage interest tax relief for letting properties should be removed. This work was to be informed by the Fiscal Policy Panel's Housing Market Review, a full public consultation, and consideration of the timing and cumulative impact on Jersey's housing market.

In December 2025, the Minister for Treasury and Resources asked Members to vote against Deputy Curtis 's amendment to P.70/2025 Amd. 14, which sought to act before this work had been completed. The Minister advised the Assembly that a full report on the matter was due to be considered by the Council of Ministers in early 2026.

Deputy Curtis 's  current  proposition precedes  that consideration by Ministers. For transparency, the final report is appended to these comments. The outcome of the debate on this proposition will be treated as fulfilling the Minister's obligation under P.72/2023 Amd. 22 (i.e. the original 2023 requirement to examine the case for removing interest relief for landlords).

A section of the report's executive summary is reproduced below:

Currently, interest paid on the borrowing to acquire a rental property can be deducted against the income from the property for assessing tax on profit. Interest payments are an expense treated in the same way as, for example, letting agent fees and costs of maintaining the property. There are no tax policy reasons why interest should not continue to be deductible as a business expense.

The  consultation  responses,  including  those  from  representative  bodies, indicated a strong preference for interest to remain available as a deduction.

Economic analysis suggests that affected landlords may respond to a change in policy by increasing rents, where possible, or selling the property. This may slow the recovery of the housing market.

The conclusion of this report is that interest should continue be fully deductible. This reflects the outcome of the consultation; the nature of the expense as being incurred in the course of business; and takes account of the cumulative impact of recent and upcoming changes affecting the housing market.

In light of these conclusions, particularly the economic considerations, Members are asked to reject this proposition to avoid the damaging unintended consequences' that this review was established to assess and prevent.1

Appendix: Tax relief on interest for landlords Report

1 Council of Ministers' amendment to Amendment 22 to the Government Plan 2024–2027

Page - 2

P.51/2026 Com.

Contents

Executive summary ................................................................................................................ 3 Summary of proposition ......................................................................................................... 3

Scope of the proposition ..................................................................................................... 3 Current landscape ................................................................................................................. 4

Deductions for interest paid ................................................................................................ 4 Other available deductions ................................................................................................. 4 Mortgage interest tax relief for main residences ................................................................... 4

Affected taxpayers – scale of impact ....................................................................................... 5 Fulfilment of the proposition .................................................................................................. 5 The Fiscal Policy Panel's Housing Market Review ..................................................................... 5 Consultation summary ........................................................................................................... 6

Option 1 – retain in full..................................................................................................... 6 Option 2 – remove entirely ............................................................................................... 6 Option 3 – restrict............................................................................................................ 6 Option 4 – phased basis .................................................................................................. 6 Other feedback .................................................................................................................. 6

Economic considerations ....................................................................................................... 7 Conclusion ............................................................................................................................ 7 Appendix 1 – a summary of other jurisdictions ......................................................................... 9

Executive summary

The report examines whether landlords should remain able to deduct interest costs from Jersey residential property rental income for tax purposes. It sets out the current rules for deductibility; the responses to the recent consultation; and outlines the potential economic impact of any changes. The paper fulfils the requirements of the approved amendment to the Government Plan 2024-2027.

Currently, interest paid on borrowing to acquire a rental property can be deducted from rental income from the property for assessing tax on profit. Interest payments are an expense treated in the same way as, for example, letting agent fees and costs of maintaining the property. There are no tax policy reasons why interest should not continue to be deductible as a business expense.

The consultation responses, including those from representative bodies, indicated a strong preference for interest to remain available as a tax deduction.

Economic analysis suggests that affected landlords may respond to a change in policy by increasing rents, where possible, or selling the property. This may slow the recovery of the housing market.

The conclusion of this report is that interest should continue be fully deductible. This reflects the outcome of the consultation; the nature of the expense as being incurred in the course of business; and takes account of the cumulative impact of recent and upcoming changes affecting the housing market.

Summary of proposition

In 2023, Deputy Mézec proposed the 22nd Amendment to the Government Plan 2024-2027, asking Ministers to abolish mortgage interest tax deductions in respect of letting properties. This was amended by the then Council of Ministers to require the Government to examine the case for removing interest relief for letting properties before taking a decision on whether to abolish it, to reduce the risk of damaging unintended consequences' to the rental market.[1]

The adopted proposition requires the Government of Jersey to:

abolish interest tax relief on mortgages for letting properties, subject to the outcome of the Fiscal Policy Panel's review of the Jersey housing market, a full consultation process, and consideration of the timing and cumulative impact upon Jersey's housing market'.

Scope of the proposition

Mortgage interest' is not a defined term within the Income Tax (Jersey) Law 1961 ("the law"): for the purpose of this report, mortgage interest is defined as any loan interest that is currently deducted from income from a residential property.[2] This includes loans secured against a

property and unsecured loans taken out in connection with the property.

It was confirmed with Deputy Mézec that letting properties' was only to includes residential properties within the scope of the review. Residential property' means dwellings.

The proposed change would affect all types of taxpayers receiving income from letting a dwelling in Jersey, including companies and other corporate entities.

Income received by Jersey taxpayers from properties outside of Jersey are subject to different rules regarding interest. It is not proposed that there is any change to these provisions.

Any changes would take effect from year of assessment 2027. Current landscape

Deductions for interest paid

Income tax, in Jersey and elsewhere, aims to impose tax on profits rather than turnover. Typically, jurisdictions that tax the returns of investments, such as Jersey's, recognise the financial costs associated with those investments. Accordingly, expenses incurred when earning this income are deductible when calculating taxable income.

Article 90AB of the Income Tax (Jersey) Law 1961 allows taxpayers to deduct interest paid on a loan for the acquisition or extension of property that is let on the open market to a third party from the rental income received from that property. The following rules apply under this article.

1. Both individual and non-individual taxpayers can deduct interest paid from their property income
2. Interest paid can be deducted in respect of all types of land and property
3. Loans do not need to be secured to a property in order for interest to be deductible

Taxpayers can deduct the full amount of interest paid; under Article 52 of the law, losses from rental income can be carried forward and offset against rental income in future years. Under the Comptroller's Concession I17, this includes interest which cannot be relieved in the year.

Other available deductions

Under Article 52 of the law, landlords can also deduct payments for maintenance and repairs; insurance and management; and other expenses when calculating taxable profits. Expenses which cannot be offset in the year may be carried forward to future years.

This is in line with the treatment for other businesses, which can deduct expenses that are incurred wholly and exclusively for the purpose of generating income from that business, such as employee wages; repairs and maintenance; and loan interest for plant and machinery used in the business.

Mortgage interest tax relief for main residences

Mortgage Interest Tax Relief (MITR) for taxpayers' main residences is no longer available. The decision to phase out MITR over 10 years was made in 2015, following a green paper consultation and an independent review of property tax in Jersey.[3]

Rental income, after allowable deductions, is taxable; rental income is therefore treated in the same way as other business income. MITR for main residences is not an expense, as it is not deducted from a specific source of taxable income, unlike interest paid on a rental property.

MITR for main residences should be regarded as an untargeted government subsidy for homeowners and is not similar in character to the interest relief available for property rental income.

The Organisation for Economic Cooperation and Development's paper Housing Taxation in OECD Countries states that there is "little justification for allowing interest payments to be deduced without corresponding taxable income". It also states "MITR does not raise homeownership rates and results in higher house prices where housing supply is constrained MITR also provides the greater benefits to high income households by subsidising the purchase of higher value properties with larger debts while doing little to support new homeowners entering the market."[4]

Affected taxpayers – scale of impact

Removing interest relief for residential rental properties will impact individual and non - individual entities. Random sampling suggests there would be a limited impact on corporate entities as they typically own commercial properties.

Across 2023 and 2024, an average of 6,000 taxpayers declared rental income from 9,000 properties in Jersey.[5] Of those, 20% of properties declared interest as a deductible expense. The median interest claim for a property was 40% of the income declared from the property. This has increased in recent years from 25% in 2021.

Around 65% of those deducting interest from their rental income only let one property; the policy is therefore currently of most benefit to single-property landlords. Owners of these properties will face an increase in their tax liability if mortgage interest relief is removed.

Fulfilment of the proposition

The proposition required the consideration of removing interest relief to take account of the following procedural expectations:

1. To use the Fiscal Policy Panel's Housing Market Review as the basis for determining next steps on the proposition;
2. To complete a "full consultation"; and
3. To consider timing and the cumulative impact on the Jersey housing market.

The Fiscal Policy Panel's Housing Market Review

The first procedural point relates to the outcome of the FPP's Housing Market Review. The FPP was asked to provide a rapid review and analysis of Jersey's housing market: as such, the report did not comment on mortgage interest relief for landlords.

It was decided not to ask the FPP to undertake a separate piece of work on mortgage interest relief for landlords. Instead, the required consideration of the timing and cumulative impact on the housing market would be undertaken by the Economics Unit.

Consultation summary

A consultation was published in June 2025 inviting views on whether interest should continue to be a deductible expense against income from residential property in Jersey. The consultation was highlighted to relevant stakeholders including the tax profession; those involved with property businesses; Citizens Advice and Caritas Jersey; and the Jersey Homelessness Cluster all of whom were invited to respond. The consultation ran for 6 weeks and closed in August 2025; a response summary document was published in September 2025.

Eighteen responses were received: of these, 11 were from individuals who indicated that they were, or had previously been, residential landlords. A response was also received from a local landlord representative body. Three responses were received from local accountancy firms. All other responses were from individuals who did not indicate whether they were landlords.

The following options were presented to respondents, who were asked to indicate their preferred option.

Option 1 – retain in full

Interest remains fully deductible against rental income from all properties and taxpayers. There is no change to the current system.

Option 2 – remove entirely

Interest is no longer an allowable expense against rental income from residential properties from 2027. Interest would remain deductible from income from commercial properties.

Option 3 – restrict

A restriction is introduced so that only a portion of interest paid is deductible. This could take the form of a maximum monetary or percentage deduction.

Option 4 – phased basis

Either option 2 or option 3 could be done gradually rather than all at once.

Fourteen respondents were in favour option 1 ( interest remaining fully deductible). The remaining respondents were in favour of option 3 (restricting interest relief to varying extents). One respondent, a former landlord, thought that the relief should be removed in full.

Other feedback

Landlords stated in their responses that, were interest no longer deductible as an expense, they would consider increasing the rent or selling the property. These potential outcomes were also raised by respondents who had not classified themselves as landlords. Alongside this, respondents highlighted the importance of a private rental market for Jersey for those who could not access any other type of housing tenure.

Respondents also pointed to other recent policies affecting the same population, including the following.

• The higher rate of stamp duty, introduced in 2023, for properties that are not a main residence.

• The Residential Tenancy (Jersey) Amendment Law 2025.

• The required licences under the Public Health and Safety (Rented Dwellings) (Licensing) (Jersey) Regulations 2023.

Respondents highlighted that interest is a deductible expense for other businesses and would remain deductible for commercial property under this proposal. Responses stated that removing interest relief for residential properties only would discriminate against one type of investment.

Two respondents in favour of restriction stated their belief that interest should be withdrawn in pursuit of equity (or at least symmetry) with owner occupiers with mortgages.

Economic considerations

In this section, the Chief Economic Advisor has considered the potential economic consequences from changes to the current tax treatment of mortgage interest paid on residential properties that are let.

Removing interest deductions will leave landlords with mortgages with a higher tax bill and lower profits. All else being equal, such landlords can be expected to increase rents to offset the reduction in profit. However, the restrictions on rent increases in the Residential Tenancy Law, which is likely to come into effect by April this year, might act to cap rent increases to RPI. Alternatively, landlords might sell their properties.

Changes to interest deductions will reduce the attractiveness of housing as an investment opportunity and potential landlords may be deterred from becoming landlords. The change is likely to dampen demand from private landlords for new buy-to-let properties and slow down the recovery in the housing market. This might be to the benefit of owner-occupiers if the number of houses for sale is increased, and as the reduced demand from landlords means prices rise by less than they would otherwise. However, the overall effect on the economy is uncertain.

Further, the importance of a well-functioning private rental market cannot be overstated. It is essential for Jersey's economy; it provides accommodation for those unable to buy a house, either due to high house prices or restrictions under the Control of Housing and Work (Jersey) Law 2012, as well as those who choose not to buy a house. The most recent data suggests approximately 17% of the adult population have restricted access to property in accordance with their residential status.

It is unlikely that the number of buy-to-let purchases with a mortgage is sufficiently high for interest relief for landlords to have an adverse effect on house prices.

Conclusion

For tax policy purposes, interest paid on a loan to acquire or extend a property is an expense alongside others such as maintenance and repairs. Unlike Mortgage Interest Tax Relief for owner occupiers, interest paid by residential landlords is incurred for the purpose of generating profit (taxable income). Interest is therefore deductible in line with the principles of Jersey's tax law.

Consultation respondents indicated that interest should remain deductible, with landlords stating the change may lead them to increase the rent or sell property. This is supported by the economic considerations and evidence from other jurisdictions (see Appendix 1).

The conclusion of Treasury Ministers, in light of the economic considerations and consultation responses, is that interest should remain fully deductible as an expense against income from residential Jersey properties.

Appendix 1 – a summary of practice in other jurisdictions

Interest as a deductible expense against income from rented property is common across the OECD, with 70% of OECD countries offering a tax deduction or credit. However, not all countries offer a full deduction of the interest paid. All jurisdictions have a unique tax system; comparing one element may provide a distorted perspective.

From 2017, the United Kingdom has phased out the availability of mortgage interest relief from rental income for personal taxpayers at the higher income tax bands (40% and 45%), restricting taxpayers to a 20% tax credit on the mortgage costs of rental properties. This change was made over 4 years.

In its 2023 Budget, Guernsey agreed to phase out mortgage interest relief for residential rental properties. Available relief was capped at 75% of the total interest paid in 2023 and 50% in 2024. In the 2025 Budget, Guernsey agreed to stop the phase out; 50% of the cost will remain available for 2025 and subsequent years.

Interest relief for residential rental property in Ireland was restricted to 75% of the total interest paid from 2009 until 2017; full relief has been available since 2019.

Interest is fully deductible against property income in the Isle of Man.

[1] Council of Ministers' amendment to Amendment 22 to the Government Plan 2024–2027

[2] Under Article 90AB Deduction in respect of loan costs: commercial letting' Income Tax (Jersey) Law 1961

[3] R.101/2014 – Property Tax Review: publication of Green Paper and PWC paper

[4] OECD, 2022, Housing Taxation in OECD Countries, OECD Tax Policy Studies, No. 29, OECD Publishing, Paris.

[5] Due to the way income tax information is collected, this should not be taken as an indicator of the

number of properties in the private rental market.