That really does seem to be the question at the moment. The purchase of residential properties as Buy to Let Investments have been increasing in popularity over recent years and many see this as a good way to invest for their future.
However, you could be forgiven for feeling that the recent tax changes and the increasing regulations imposed on Landlords is a sign that maybe it is more trouble, and expensive, than it’s worth…
Stamp Duty Land Tax
The new Stamp Duty Land Tax regime now sees purchasers of second homes and BTL properties required to pay an extra 3% of tax in each of the tax brackets, making initial investment required far more expensive than before. The purchase of a property at £250,000, would have incurred an SDLT liability of £2500 in March 2016, but the charge for SDLT will now be £10,000 – requiring and additional investment of £7500! Ouch!
Whilst Capital Gains Tax rates have been cut, the Chancellor excluded gains made on property prices and such gains will therefore be subject to the old rates. This follows on from other tax increases on property investors; including the changes to the way in which tax relief is applied to mortgage interest for landlords.
As well as tax changes, the legislation being imposed on landlords seems to be increasingly onerous. From the 1st February 2016 it is an offence for private residential landlords to let properties to tenants who do not have a right to live and stay in the country, carrying a maximum penalty of a £3000 fine. Landlords are therefore now required to check the status of their tenants and retain records of those checks
In addition, it is now time to start paying attention to Energy Performance Certificates! The Government are duty bound under the Energy Act 2013 to issue minimum energy standards in respect of commercial and residential properties. The indication is that there will be a minimum “E” rating required for new lettings from April 2018. It is also believed that from 2020 even existing lettings (from pre 2018) will need to have a minimum “E” rating. Therefore if your property is showing an “F” or “G” rating on the EPC, it will be unlawful from April 2018 to let this property out meaning landlords will have to pay out to improve the energy efficiency of their property in order to continue to let it.
And so, the unrelenting onslaught against buy to let investors shows no sign of letting up. The government seem to be of the view that by reducing the number of investors in the market, there will be more properties available for first time buyers and prices will not increase too quickly. Unfortunately their plan seems short sighted and misguided. The increased costs to the investor will inevitably be passed on to the tenants, making rents more expensive and making harder for those renting to save up a deposit to get on to the housing ladder. Furthermore, the value that investors bring to the UK property market has been completely overlooked. The properties that investors let out to residential tenants provide an essential service to millions of people who are happy to rent. They also help to keep the property market moving as if no-one is purchasing the “entry level” houses then those people cannot move on to their second “family” homes and so on.
It will take deeper pockets than previously required but buy to let investors are a key part of our housing market and hopefully, they will continue to invest in property and reap the benefits of that investment.