The buy-to-let market has declined in recent months, but can it still represent a good investment?
There have been a number of changes to the rules around buy-to-let properties over the past year that have potentially affected the attractiveness of this as an investment opportunity. From changes in stamp duty to restrictions on tax relief, we’ll take a brief look at whether the new legislation should influence a decision to enter this market.
Buying an additional property to let used to be a similar process to buying your own home. However, any to-let properties happening after 1st April 2016 have had an additional stamp duty tax applied of 3% of the property value. In effect, this makes properties more expensive and, therefore, less attractive to would-be landlords.
Tax relief on finance costs, such as mortgage interest, associated with let properties are, as of 1st April 2017, no longer 100% tax deductible. Over the course of four years finance costs will gradually become restricted to the basic rate of income tax. This will make letting properties far more expensive for any landlord who has borrowed significantly to finance their investment.
The replacement of the wear and tear allowance with a relief related directly to costs associated with letting a furnished property will not have a great impact on the viability of letting as an investment option. It may increase the administrative burden on a landlord slightly, but this shouldn’t be considered as a key factor.
The recent flurry of changes to rules around buy-to-let may have muddied the waters for some future investors. For more information on whether or not buy-to-let is right for you, get in touch.