Time to review your buy-to-let portfolio?

While many owners of buy-to-let properties have chosen this as business or as a deliberate investment strategy to save for their pension, many have found themselves in the role of landlord by accident.  They have found themselves renting out a property that they inherited or couldn’t sell at the price they wanted; that they no longer needed when moving in with a partner or getting married; or while they work elsewhere temporarily.

With interest rates consistently low and plenty of demand for rental properties this has been an attractive arrangement for some time.  However, a number of tax and regulatory changes are putting the squeeze on buy-to-let landlords who are seeing their returns getting smaller and smaller each year.

According to Susan Ward a conveyancing lawyer at Mooney Everett Solicitors in Ormskirk, West Lancashire, ‘It is always a good idea to review your buy-to-let property portfolio from time to time, but it is particularly important to do so now as some landlords may wish to think about selling some of the properties which will no longer provide an adequate return on investment.

In summary, the key changes affecting landlords include:

  • the 3% stamp duty land tax surcharge on additional properties which was introduced in 2016;
  • increased costs for individual landlords who borrow to finance their buy-to-let due to the phased reduction in tax relief in mortgage interest payments which has come down from 100% in 2016/17 to 50% for 2018/19 and will taper to 25% this year and disappear for the 2020/2021 tax year;
  • changes to section 21 repossession powers making it much harder, and likely more expensive, for a landlord to evict a troublesome tenant;
  • recent changes under the Tenant Fees Act which came into force at the beginning of June 2019 and will push a number of administrative costs (such as reference checking) back onto landlords while preventing the landlord from increasing the rent to recover these costs; and
  • the government is also consulting on proposed changes to two of the ancillary reliefs on Capital Gains Tax which will affect those who let out a property which was once their main residence – these are expected to bite from April 2020.

The Residential Landlords Association has reported evidence that an increasing number of landlords have been selling some or all of their investment properties as a result of these changes.

Other buy-to-let investors are choosing to set up a dedicated company, but this route has its own burdens in terms of tax, administration and public disclosure and so it is not suitable for everyone and it is important to take specialist advice from a tax expert.

With so many changes impacting on residential landlords, it makes sense to calculate how they will affect your finances over the next few years and consider whether now is the time to sell off some of the poor-performing properties in your portfolio.

On the other hand, a rush to sell by some landlords might mean that there are some good bargains to be had for the canny investor.

Either way, our experienced conveyancing team will be delighted to help you buy or sell any investment property.

For a confidential discussion, contact Susan Ward at Mooney Everett Solicitors on 01695 574 111 or email email hidden; JavaScript is required.


This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.