Tax relief is currently available on mortgage interest payments up to £3,500 a year – or £7,000 for a couple in owner-occupation – but Policy & Resources wants it removed in full by the end of the current States term.
Its draft Budget, published today, proposes reducing the relief to £2,000 per person in 2027 and £1,000 in 2028, before eliminating it in 2029.
It will be the latest in a long line of attempts over the past 15 years to reduce or scrap the relief. A similar proposal was defeated during last year’s Budget debate.
‘The Housing Committee has recommended that the phased removal of the relief is reinstated, with that revenue instead used to provide targeted support for first-time buyers,’ said P&R in its Budget report.
'It is actively working on several measures designed for first-time buyers and young homeowners with the aim of being able to propose these in the 2028 Budget.’
But these targeted alternatives to mortgage interest relief may not be published for another 12 months.
The proposal to withdraw mortgage relief is certain to interest opponents of P&R’s tax package, approved by the States last Friday. It was said that the package would leave many middle-income households better off but by amounts smaller than the loss they will incur should mortgage relief be withdrawn.
Meanwhile, P&R’s draft 2027 Budget included inflation-only increases in fuel duty and domestic TRP.
Most commercial TRP would also rise only in line with inflation, but rates would be frozen for businesses in hostelry, retail and warehousing, whereas they would be increased by 15% on land used for car parking.
The personal tax allowance would increase by £650 from 1 January, in line with inflation, to £15,850, but the income threshold at which the allowance is gradually withdrawn would be frozen to collect more tax overall from higher earners.
The general duty on alcohol would increase by inflation plus 2%, which P&R said would improve States revenue and public health, despite representations from the Economic Development Committee asking for a real-terms freeze.
However, P&R is also proposing to discount duties for draught – or ‘tap’ – beer, cider and wine from 2027. The discount would be 15% for lower-strength products and 10% for higher-strength, with the highest-strength alcohol excluded.
‘The proposed structure is intended to target support towards hospitality businesses while recognising wider public health considerations and limiting incentives towards higher-strength alcohol products,’ said P&R in its Budget report.
It will ask deputies to agree increasing duty on all tobacco products by inflation plus 5%, pushing the price of an average packet of 20 cigarettes from £9.71 to £10.60.
It has also recommended that a new duty on electronic cigarettes, agreed last year, should come into force on 9 November.
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