Further mortgage interest tax relief “not appropriate”

THERE are no plans to reintroduce mortgage interest tax relief while removing GST from food would be unlikely to have much impact on prices, the Treasury Minister has said.

Deputy Elaine Millar said that ministers had recently held discussions about the future of mortgage interest relief, which was cut as part of the 2016 Budget and is set to be phased out completely by next year.

The scheme enables Islanders to claim tax relief on loan interest payments for the purchase or extension of their main property. Many households coming towards the end of fixed-rate terms are facing the prospect of a massive rise in their monthly repayments with Bank of England base rates having increased significantly in recent years.

A petition calling for the tax break to continue beyond 2026 has been launched by Islander Claudia Alves, who argued that the “allowance is needed now more than ever to give much needed financial relief for home owners paying high mortgages”.

In 2015, when the phased removal of mortgage interest tax relief was agreed by the States Assembly, the Bank of England base rate was 0.25%. Yesterday, that figure stood at 4%.
Deputy Millar said: “We did have some discussions about it at the end of last week.

“Removing mortgage interest tax relief for home ownership was agreed in 2015 and it has been being phased out gradually – 2025 is the last year that it will be available

“The idea behind it was to ensure that there was no unfairness between those in home ownership and those paying rent. It is a form of support that is available for home owners that is not available for other people.

“Given the stage we are at with it now I don’t think it would be appropriate to revisit that. I would not be beneficial to delay that any further and keep it in place. From our perspective, it is still better to target help where it is most needed and that is what we are looking at.”

The Treasury Minister added that she was not convinced the reinstating the allowance would help home owners greatly given the fixed level maximum thresholds that could be claimed.

A consultation on whether mortgage interest deductions should also be removed for landlords is currently taking place following a 2023 amendment to the Government Plan from Sam Mézec. Members agreed to a Council of Ministers amendment to require the Government to review removing the allowance for landlords before taking a decision on whether to abolish it.

Meanwhile, Deputy Millar said calls to axe GST from food would be considered by ministers, but admitted that she did not foresee any changes being made.

Another petition calling for GST to be removed from food has surpassed 1,000 signatures which means it will receive a ministerial response.

The Treasury Minister said: “We will respond but my initial thoughts are that it is not something we would be looking at.

“There will be an impact on revenue which is not currently planned for in the Budget.”
GST was introduced in Jersey in 2008 at an initial rate of 3% but rose to 5% as part of the 2011 States Budget proposal and has remained at that level since despite several calls over the years to remove it.

In 2022, Deputy Raluca Kovacs lodged a proposition to scrap the 5% sales tax but the move was rejected by States Members by 28 votes to 17.

Deputy Millar said: “We had the debate in the States in 2022 and the arguments are similar to what they were then.

“I am not convinced it would lead to any significant difference to the price of food as the extra admin and processing will create a cost for retailers which will have to be passed on so the chances of it making a difference are slim.”