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What the Election Could Mean for Buy-to-Let Landlords

Published by Prerana
Posted Date: July 3, 2024 , Modified Date: July 3, 2024

During this campaign season, all the major political parties vied for the attention of Buy-to-Let landlords with promises of tax relief and regulatory changes. The Conservatives focused on protecting renters’ rights, while Reform UK offered tax incentives which could significantly move the property market.

Now, with the elections only a day away, it is worth taking a look back at the changes these two parties are proposing for Buy-to-Let landlords.

How Do the Conservatives Say?

The Conservatives have plans to abolish no-fault evictions, meaning landlords need to have a specific reason for kicking tenants out. This policy will help protect renters from sudden displacement.

It may seem like a setback for the landlords. But the party appears to balance it out by strengthening the grounds for evicting private tenants for anti-social behaviour.

buy to let landlords

Another major policy proposed by the Conservatives is a two-year temporary Capital Gains Tax (CGT) relief for landlords who sell their properties to their existing tenants. Currently, the CGT rate for landlords is 18% if they are basic-rate taxpayers and 24% if they are higher-rate taxpayers. This relief would drive more landlords to sell their properties and give tenants the opportunity to become homeowners.

What Incentives Are Reform UK Offering?

Reform UK is targeting traditional Conservative voters by promising incentives for landlords. The party has pledged to restore landlords’ rights to deduct finance costs and mortgage interest from tax on rental income. This relief would help landlords to reduce their taxable income significantly, resulting in low tax bills. This could mean substantial savings for many landlords, which could drive the buy-to-let investment market, making it more attractive and financially viable.

Tips for First-Time Buyers and Buy-to-Let Landlords

In line with the changes that appear to be around the corner, here are some tips for first-time buyers:

  • Before making a decision, it is always better to research whether it’s cheaper to buy or rent. Due to high mortgage rates, renting was affordable last year. However, buying is much cheaper currently.
  • Save for a deposit. A 95% mortgage or 30-year mortgage could be an option but can come with higher interest rates.
  • Consider a Lifetime Individual Savings Account (ISA) to save for a deposit. Save up to £4,000 each tax year, and the government will add a 25% bonus. However, the money can only be used to buy a first home of up to £450,000 or for retirement savings.

Here are some tips for buy-to-let landlords aligning with the proposed changes that the parties are pledging:

  • Research on which area of the country offers the higher rental yields. The profitability or rent growth differs according to the location.
  • Incorporating properties into a company or Company Incorporation can be more tax efficient. However, it can also come with additional costs and responsibilities, such as higher mortgage rates.

Conclusion

The upcoming election may lead to big changes that could affect people who rent out properties. The Conservative party wants to protect renters and give temporary Capital Gains Tax relief. The Reform UK party intends to focus on bringing back important tax deductions for landlords. By staying informed and planning investments carefully, both new buyers and experienced landlords can navigate the changing property market with confidence.

Prerana
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