Is it time to say Let It Be to buy-to-let?

If you are looking for an investment where the tax treatment works in your favour, look no further than a pension.

Every year the Government gives back billions to investors in pension tax relief. For example, a basic rate taxpayer can turn an £80 pension contribution into a £100 investment, and even better still, a 45% taxpayer can turn a £55 pension contribution into a £100 investment with the benefit of tax relief.

The investment growth is free of income tax and Capital Gains Tax, and there is a tax free element when you draw benefits. Your family can even inherit your unused pension without paying Inheritance Tax. No other investment grants the same tax benefits.

The antithesis of a pension investment is currently a buy-to-let investment, where the rules are designed to tax you at every turn.

Buy-to-let investments have suffered a marked slowdown in popularity as the rules have dramatically changed:

  • A 3% surcharge on the current rate of stamp duty, announced in 2015, has hit anyone buying additional residential properties, including buy-to-let investors.


  • The help that landlords currently receive via the tax relief they can claim on mortgage interest will also change from April 2017. At the moment they pay tax on their profits according to their income tax band. The relief will be whittled away until by 2020 it will be replaced with a 20 per cent tax credit against mortgage interest


  • Also landlords can no long deduct 10 per cent of their rental profits for estimated ‘wear and tear’ – now they can only claim relief on costs they have incurred and will have to keep receipts to prove they have spent money on replacement items and repairs.


  • Capital Gains Tax rates of 18% and 28% still apply to profits on buying and selling property, whereas tax rates for other assets such as shares has been reduced to 10% and 20%.


  • As an extra worry, landlords will have to pay Capital Gains Tax on any profits within 30 days of selling a property from April 2019.


  • Selling off properties does not come cheap – there are lots of fees and charges to consider, and it could take time. And even if you manage to find a buyer, they might not be prepared to pay the price you are looking for.

This could mean a sizeable hit in income for many buy-to-let investors.

Perhaps it is time to seek out someone speaking words of wisdom on alternative investment opportunities, including pensions.

If you are considering entering the buy-to-let market, speak to one of our specialist advisers for professional and impartial guidance on the alternative options available which could earn you a better return on your investment.

Call 01244 347583 for a free, initial consultation to discuss your options – we are available at times to suit you.

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