What happens if I want to invest in property?

Britain’s property market has traditionally always been considered a stable and sensible place to invest your money, regardless of whether you are an aspiring landlord or just looking to purchase a home to sell-on in the near future.

However, depending on your intentions and unique situation, there are a number of matters to consider in order to get the most out of property investment.

Following SDLT changes rolled out in recent years, any existing homeowners who purchase a second or ‘additional’ property – i.e. for buy-to-let purposes – will need to pay an additional three per cent SDLT surcharge upon purchase. If you are intending to invest in property as a buy-to-let landlord, this needs to be taken into account.

The rules governing SDLT can prove costly – and it is important to ensure you can cover these costs, yet continue to make a profit when you come to let out the property. It is equally important to factor in other typical purchase costs such as conveyancing and surveyors’ fees.

An average investor purchasing a £150,000 property will effectively lose £5,000 in SDLT.

Furthermore, changes to mortgage stress tests introduced by the Prudential Regulation Authority also need to be considered – particularly if you are an existing investor who already manages a large portfolio of buy-to-let homes.

Following new rules, mortgage lenders must carefully assess the affordability of landlords before they are able to offer them a mortgage. These changes mean that portfolio landlords need to provide extensive tax and financial information to lenders in order to meet the requirements of so-called ‘stress tests’.

On top of this, both existing and aspiring landlords also need to be aware of ongoing changes to mortgage interest tax relief.

First introduced in April 2017, these gradual changes will see the tax relief landlords are entitled to claim for finance costs slowly restricted to the basic rate of income tax between now and 2020. Previously, landlords were able to deduct mortgage interest and other allowable costs from their total taxable rental income – but this is unfortunately no longer the case.

Need advice?

Despite the various tax challenges today’s buy-to-let landlords face, property investment remains incredibly popular in the UK and can still be very lucrative if the right advice is sought ahead of time.

For more information on investing in property, contact our expert team at Moore Thompson today.

Posted in Accountancy, Accounting, Blog, Finance, Financial Planning.