Expert Guest Article 
James Keable, Mortgage Services Director Capital Private Finance
In recent history, having an investment property was the obvious move for those that had some spare cash and wanted a better-than-average return. It had capital appreciation as the price of property carried on its seemingly never-ending and exponential rise as well as providing a regular income to supplement or in some cases be their wages.
However, with changes over the last few years to the tax laws both on buying second and subsequent homes in addition to the income that comes from them, the appeal has reduced and the complexity increased. So is the Buy-to-Let era over?
The answer is definitely not. It may be less linear than it once was, but when you review the history of property value and the reasons behind why most people consider it as a way to realise their future plans, then most of these justifications still apply. Nowadays, your customers just need some expert advice, whether that’s from a tax specialist, a mortgage expert or both.
There are still many reasons why investing in bricks and mortar is still a good move, ranging from helping their children onto the property ladder, creating a retirement income, forming a UK base to come back to, building or supporting a business, growing their capital over the longer term or a combination of motives.
Between 2017 and 2020, when mortgage income tax relief was eradicated, it meant that individual Buy-to-Let landlords were unable to offset their mortgage interest costs against their tax bill. Due to this, the government introduced a 20% tax credit for those on the lower tax rate, although it is not as beneficial for higher-rate taxpayers. However, those that invest through a limited company may still be able to offset mortgage interest and relevant costs against the company's tax bill.
There can also be advantages due to the current rate of corporation tax (even after the budget announcement) being lower than many people's personal tax rates (such as higher rate tax payers and above). The income derived from a limited company, special purpose vehicle (SPV), can be drawn down via dividends and this can be done in amounts and with timing to make it more tax efficient than a property held on a personal basis in many circumstances. Owning through a limited company also gives you a level of separation and protection from a legal standpoint, if for example, a tenant left with unpaid council tax or utility bills.
It is important for anyone looking into buy-to-let to weigh up the pros and the cons, after seeking specialist tax advice. As although landlords and investors can take advantage of the tax benefits of a limited company, they may have to consider paying personal tax on income, as well as corporation tax and capital gains tax benefits which may not be so advantageous if a property is then sold.
For those wanting to keep an interest in UK property whilst they work abroad or those that want to establish a base for when they return, there are specialist lenders who offer some great terms that make owning property in the UK for ex-pats potentially even more advantageous than for UK residents. This can involve additional stress testing, meaning a smaller deposit may be required for strong returns.
For those staying in the UK, there can be ways to make the stress tests work. “Top slicing”, is where personal income can be used to supplement any shortfall in the calculation, meaning that larger deposits are not required. We may also see stress tests ease to keep the supply of rental property from drying up and aggravating the housing shortage.
In short, property ownership is still thriving as an investment, despite the shortage of property in the UK. There are many who cannot, or do not want to buy now but still need a place to live. Rental yields can still provide a good return in many instances and property is still a resilient and historically proven long-term investment.
For some who have already invested, re-mortgage time may be a concern, with many wondering whether now may be the time to get off the property ladder. Stress test calculations and higher interest rates can make things more difficult, but the likelihood is that your property has also increased significantly in value over the last few years, so things might add up a bit better than you fear. However, that’s where great mortgage advice comes in.
Our view is that there is still money to be made and income to be derived from property; you just need some good advice from an expert. For more information on how Hamptons can support you please read our Guide for Landlords.
Get expert mortgage and protection advice tailored to you
The experts at Capital Private Finance have access to a vast array of mortgage products and can access a range of specialist products not available to all brokers. This means that if it is possible to arrange finance, then we should be able to help you achieve your goals.
Contact Capital Private Finance
ALL MORTGAGES ARE SUBJECT TO STATUS AND LENDER CRITERIA. MORTGAGE PRODUCTS CAN BE WITHDRAWN AT ANY TIME.
A FEE WILL BE PAYABLE FOR ARRANGING YOUR MORTGAGE. YOUR CONSULTANT WILL CONFIRM THE AMOUNT BEFORE YOU CHOOSE TO PROCEED.
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU RE-MORTGAGE.
Mortgages available through Capital Private Finance. Capital Private Finance is an Appointed Representative of Mortgage Intelligence which is authorised and regulated by the Financial Conduct Authority under number 305330 in respect of mortgage, insurance and consumer credit mediation activities only. Registered Office: Greenwood House, 1st Floor, 91-99 New London Road, Chelmsford, Essex, CM2 0PP. Registered in England & Wales under number 07552028.
