The government’s tax changes affecting buy-to-let landlords, combined with the ever looming threat of a rise in interest rates could make owning rental properties unprofitable for many landlords across the country.
Landlords who earn enough to be higher rate tax payers will lose much of their rental income from 2017 as the tax man will be taking a much larger slice.
While wealthy property owners will most likely not be affected, honest, hard working middle-class savers will be hit. Those who have invested their hard earned money into buy‑to‑let properties could be badly affected. What should have been an extra source of income for their retirement will be turning into an extra source of stress with not much financial gain for their troubles.
Even basic rate tax payers with a couple of properties could be affected. The new rules may mean they now become higher rate tax payers, pushing them into the 40% bracket and having to pay more tax.
What’s caused this big turn-around in fortunes for buy-to-let investors? Basically, the government has decided that they would like to get their fair share of landlords’ profits. By taxing them on the full amount of their rental income as opposed to them only paying tax on the profit they make after they’ve paid their mortgage, much more tax will be raised.
‘Generation rent’ tenants will be cheering as they blame landlords for “buying up all the properties”. Houses that 1st time buyers can’t afford. Landlords are seen as forcing property prices up making it ever harder for normal families to ever be able to own their own home.
Regardless of who’s to blame for what, if you own rental properties and you have mortgages on them, you could find that you will be earning much less from your investments in the future. Of course, if you are not earning much from them anyway, (and a large proportion of buy-to-let landlords don’t), this could be the last straw, forcing many to sell up and get out of the game altogether.
Again, some will not feel too much sympathy as news programmes and countless documentaries on TV have highlighted rogue landlords up and down the country who have been giving the whole buy-to-let industry a bit of a bad name. But the fact remains that the government has decided to put an end to the buy-to-let party as some fear another housing bubble is not too far away if things continue the way they are.
The fact that a huge amount of ordinary hard working people, who had found in buy-to-let, a way to actually be able to retire one day and not be totally broke in old age, will be feeling angry and betrayed, seems not to be of major concern to our leaders, as, let’s face it, there won’t be another election for 5 years and by that time most people would have forgotten.
If you have rental properties that you are not going to earn much money from, what’s the point of putting up with all the hassle of being a landlord?