2019 has brought some changes to the buy to let market. Property investors across the country are sure to be deliberating over whether it’s better to buy, sell or refinance their portfolios. With changes in tax relief and HMO (houses in multiple occupation) regulations the question “is it worth it” will be in many people’s minds
The ONS (Office for National Statistics) report of the rental sector for 2018 tells us that there were 4.5 million households renting privately. This is predicted to rise to 6 million in the early 2020s. Younger households are more likely to rent privately than older households; in 2017 those in the 25 to 34 years age group represented the largest group (35%). So, the market is there, and with the UK House Price Index falling by 1% in early 2019 but expected to rise by 5-6% over the next two years values will continue to outstrip inflation.
The more negative aspects of the picture included a rise in stamp duty on properties that are not a primary residence, particularly affecting houses over £250,000. The headline change has been the move to reduce tax relief on rental income back to the basic rate of income tax by the 2020-21 tax year. This has led to landlords setting up companies to manage their portfolio through. A landlord can choose to buy as an individual and be subject to tax charged at income rates or buy through a company and benefit from potentially preferential rates of tax. Even those with smaller portfolios are choosing this option – across the market as a whole, 44 per cent of landlords are expected to set up new buy-to-let purchases through a corporate structure. We will return to this subject in a future blog but, as always, good advice from your tax advisor is essential when looking at whether this option is the right one for your personal portfolio
The answer to the question “is it worth it” is different for each individual investor but David Blake of Which? Mortgage Advisers says: ‘While existing landlords may feel taxed, it’s not all doom and gloom. Re-mortgaging rates are low and with such competition in the market, there’s arguably more choice of lender and product than ever before.’ This suggests that with careful management of the financing of your portfolio and with advice from professionals in the field the answer is a qualified “yes”. When planning the borrowing for your property portfolio it pays to take advice from an established company. At Spot On Mortgages we will be happy to assist you. Get in touch to discuss your plans.