How do new tax changes affect the Buy To Let market? —
18th May 2019
It wasn't long ago that people with a modest deposit (15%) could think about a buying a flat, renting it out and becoming a landlord. It was all the rage - owning a second home seemed a fail safe way to protect and enhance your financial future. House prices were rocketing and you could get a 5% return on your investment - what was not to like? The additional income generated by your investment was taxable but landlords could offset expenses such as all your mortgage interest and 10% allowance for fair wear and tear. If you were a higher rate payer the story just kept getting better. However, since George Osborne's budget in the autumn of 2015 things have changed a lot and its important to understand exactly what has changed before you embark on such a route. The changes are still happening and will continue into 2020. Suffice to say the golden combination of a good rental yield, full tax relief at your top banding and year on year capital appreciation are becoming a distant memory. Property markets are cyclical however and renting out a property you own can be very rewarding long term. Better days are bound to return due to continued housing shortages and an increasing population requiring somewhere to live.
I'm regularly asked if Buy To Let is still worth it. With a high entry cost and slow exit execution if you want to cash in, this is a long term strategy for sure. The bigger deposit the better - in fact try and buy outright with cash if you have funds sitting in a bank current account earning little interest. One important question to ask yourself when considering purchasing a property for investment is - do you want to become a landlord? Its not for everyone but has been very successful for others. I came across a very helpful web page that goes through the ups and downs in more detail and hope you find it useful.