AS a landlord with a small portfolio of seven buy to let properties bought over the last 15 years, I have made a decision not to invest any further in the sector thanks to new tax laws from the UK Conservative Government.
From 2021 I will be taxed on turnover on my properties rather than on profit made from the letting. This means my mortgage costs will no longer be viewed as costs, but as profits. It is quite simply insane to think I would enter this market now and I am considering my future as a landlord completely.
At least if the law only affected landlords who entered the market now, then I could live with it. With eyes open you would decide whether to invest in property or not. And if you need a mortgage, the answer to that question has to be a quick ‘no’. There’s no way it is sustainable to pay tax on mortgage costs, you could end up paying tax on a real life loss.
The only silver lining here is for landlords who don’t have mortgages – they are off Scott free. That is the Conservatives helping the wealthiest again and it doesn’t help me at all.
I am planning on putting my rents up as quickly and high as I possibly can to meet the new tax obligations. That’s not great for the tenants but they can take it up with the Conservatives when they like. That’s the least of all evils in my view, as I cannot afford to sell and pay the capital gains tax and mortgage redemption fees. I am doing my best to protect my pension, because that’s what my property portfolio is.
It means my business will continue to operate and charge clients but I’ll be taking very little drawings from it to minimise my tax exposure under this new law. I’ll build a nest egg there rather than in property.
Sadly, over the last 15-years, property has been a brilliant investment class for me. It’s outperformed shares by incredible margins and blown ISAs and their high management charges out of the water. Now it is no longer possible to make money from it I’ll need to invest elsewhere. Or simply pay down mortgages to reduce my tax exposure again.
So that’s why I am not buying anymore buy to let property right now. And if the Conservatives ever think they will get my vote again they can sing for it. It is a terrible policy that is going to hurt a lot of people.