Buy-to-let property has been a favourable choice for investors who wish to generate an income from real estate.
However, investors may turn their back on property in light of new tax changes to the sector.
Changes to UK buy-to-let
In 2015, Chancellor George Osborne announced two changes that rocked the UK’s buy-to-let sector.
The first was a reduction to the amount of tax relief landlords can claim. Currently landlords can claim up to 45% but in a move which will be introduced over a 4-year period beginning in April 2017, landlords will only be able to claim up to 20%.
Second of all, landlords and those who wish to buy second home will also be hit with a higher stamp duty rate. A 3% surcharge will be applied to buy-to-let purchases from April 2016.
Stamp Duty Rates (on purchases)
Property value Standard rate Buy-to-let/second home rate (April 2016)
Up to £125,000 0% 3%
£125 – £250,000 2% 5%
£250 – £925,000 5% 8%
£925 – £1.5m 10% 13%
Over £1.5m 12% 15%
In light of these changes, some estate agents have reported a rise in the amount of people looking to buy before new stamp duty charges come into play in April.
Is buy-to-let still profitable?
There has been a lot of talk in the world of property about whether or not buy-to-let property will remain king.
The House Shop rounds-up the thoughts of leading property experts in this article.
The general consensus is that investors can still make money from buy-to-let however, investors should consider their options carefully.
Experience Invest has suggested that buying property in the north of England will help reduce stamp duty outgoings. Traditionally, the price of property in the north is lower than the south. Although paying a higher stamp duty rate will be unavoidable from April 2016, investors could lower their bill by purchasing a cheaper property.
It is yet to be seen whether or not buy-to-let will be king in 2016 however, with the UK’s housing shortage showing no signs of easing, the need for property investment still remains strong.