Osborne announced earlier this year that mortgage interest tax relief would be restricted from April 2017. Other changes include limiting the amount of wear and tear that can be offset against tax.

These changes will limit the amount of profit made by landlords and increase costs, according to London chartered accountants Blick Rothenberg LLP.

“This is the latest package of measures impacting residential property, presumably to make buy-to-let properties less attractive for investors, and an attempt to ‘cool’ the housing market, said Nimesh Shah, partner at Blick Rothenberg.

“Whilst the intention behind the changes may be to free-up housing supply by discouraging investors, individuals who rely on returns from their buy-to-let properties to top-up their income or use as a pension for retirement will now see their after-tax profits reduced.”

Current rules allow landlords to deduct all their mortgage payments to calculate taxable rental profit. However, this will be restricted to the 20% basic rate of tax in future. These changes will be introduced between 2017 and 2021.

“With interest rates expected to rise sometime in the next year, buy-to-let landlords with significant debt will see a reduction in tax relief, which will naturally result in higher costs and lower after tax profits,” Shah added.

“For example, a buy-to-let landlord with debt of £250,000 and interest charged at 3.25% will see their annual income tax liability increase by approximately £2,000 (if they are a 45% taxpayer).

“For serial buy-to-let landlords, they will probably look to operate their property businesses through companies as the same restrictions do not apply. In addition, the main rate of corporation tax is reducing to 18% by 2020, further increasing the difference between corporate and personal tax rates, making companies more attractive.

“However, for those with one or two properties, the associated cost and administration involved with operating a company is unlikely to make it worthwhile.”