Reform of Tax Reliefs for Owner‐Occupation

The article looks at the different distributional patterns of two alternative ways of reforming relief for owner‐occupation in UK, namely the reintroduction of income tax on imputed rent (the optimal reform, assuming housing is an investment good) or the withdrawal of tax relief for mortgage interest payments (possibly the more likely political reform). Inland Revenue data show that removal of mortgage interest relief (exclusive of the Option Mortgage) would be the more progressive measure. Removal of relief at higher rates of tax would be one possible step on the road to reform of mortgage interest.