Letting go of buy-to-let
16 May 2019

For years, ‘bricks and mortar’ has been perceived as a failsafe investment for retirement.

An investment as safe as houses?

More recently, new flexibilities introduced in 2015 have encouraged adventurous types to think beyond pensions and annuities, turning buy-to-let property into an even more popular choice.

But with rising property prices and hard-hitting changes to the tax regime, many investors are feeling ready to let go of buy-to-let. Landlord Today reported that buy-to-let landlords are in ‘retreat’, with a 25% reduction in property exchanges.

Taxing changes

Landlords could previously offset their mortgage interest against higher rates of income tax. But now – with changes that started in April 2017, to be rolled out over a four-year period – mortgage interest relief will soon be limited to basic-rate tax only. Staying within the basic rate becomes even more difficult as property investors must now combine their rental income and their other income to set their tax rate.

To make matters worse, a 3% surcharge on stamp duty for second homes was added in April 2016.

These changes have had a significant effect on buy-to-let returns, but they’re not the only factors driving investors away.

A costly business

Every move you make as a buy-to-let investor seems to come at a high price. The list of fees and expenses is long including: mortgage fees and interest payments, fees for surveyors, solicitors and estate agents, ground rents, service charges, and management and maintenance fees. To names but a few.

Selling up is particularly expensive when capital gains tax is factored in. And remember, a property forms part of your estate when you die, so there may also be inheritance tax to pay.

One of the biggest costs is the sheer hassle – the amount of time and effort required just when you may be feeling ready to slow down.

Is buy-to-let really the answer?

If you’re in a buy-to-let dilemma, take some time to think about what you really want from your investment. Is it regular income? A long-term lump sum? Are you hoping to keep the family home for your children? Do you want a challenging business project? Most of these goals could be achieved by other means.

Make the most of tax allowances

If you’re thinking of letting go of buy-to-let, consider other ways to make the most of your money. Make sure you, and your partner if you have one, are making the most of your tax-free allowances.

If you’re still working, pensions offer valuable tax advantages, and they aren’t usually subject to inheritance tax. ISAs and the personal savings allowance can also give a tax-free boost to your savings. The dividend allowance means you can earn some dividends tax-free each year.

There are a variety of options available that could be simpler and more cost effective than a buy-to-let investment. And remember that tax rules can change and taxation will vary depending on your individual circumstances. You should seek pensions and tax advice if you’re not absolutely sure. Speak to an advisor who can explore your options and help you move forward.


Interested in ways to reach your retirement goals without the hassle of being a landlord? Give us a call on 020 3823 8678 or fill in the form below to get in touch.

Explicit explanations

"Thank you very much for meeting with my wife and I to discuss inheritance tax and other associated issues, at your office. Your explicit explanation of the above matter has clarified a number of important fiscal areas, which has given us further food for thought."
Property Developers, London

Talk to us, at a time to suit you

Give us a call today or leave your details below and one of the team will call you back.
* indicates required field

Our offices

© 2001 – 2020 Seven Investment Management LLP. All rights reserved.

Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority,
the Jersey Financial Services Commission and the Guernsey Financial Services Commission. Member of the London Stock Exchange.
Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales No. OC378740.

The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

An error occurred!