Why Are Buy-to-Let Landlords Looking For Alternative Investments?

According to?Hamptons, the Estate Agents, Buy-to-Let landlords sold 35,000 more properties than they bought in 2022 with “more likely to sell than buy in 2023 and possibly 2024.”

It seems that the recent jump in mortgage charges, tax changes and stricter regulations are making the buy-to-let proposition increasingly unappealing. An article by Ashleah Pope?‘2023 Buy-to-Let Updates and News: 5 Changes for Landlords in the UK’?highlights some of the legislation likely to affect landlords the most.

Data from?Moneyfacts?shows the average cost of a new two-year buy-to-let fixed rate mortgage stood at 5.95% at the start of February 2023. That is up sharply on the 2.9% average at the start of December 2021, though it has come down a little from the 6.75% peak reached in early November last year after the crisis in the bond markets triggered by the Kwasi Kwarteng-Liz Truss mini-budget.

In December, the Bank of England forecast that by the end of this year, monthly mortgage repayments for buy-to-let landlords would typically rise by about ￡175. It warned that a fifth of landlords with a mortgage would face increases of more than ￡300. Will they be able to pass these costs onto tenants?

How are regulations for residential Buy-to-Let landlords impacting the market?

The regulatory burden has increased for landlords recently and this year, Michael Gove, the secretary of state for levelling up, communities and housing plans to strengthen tenants’ rights even further with the scrapping of section 21 “no-fault” evictions.

In addition, all homes in the private rental sector will have to meet a minimum standard to be known as the Decent Homes Standard. The Goodlord Team’s?article?commenting on the proposals published in September 2022, states “The government consultation says that around 79% of properties in the PRS already meet the current standard, and therefore won’t require any additional investment. However, that leaves 21% of properties that don’t meet the standard and will need to invest in upgrades.”

Owning a the right type of buy-to-let can still be a good investment depending on the property and whether or not you are funding a lot of debt in the face of falling property values. However the new regulations and economic environment may be pushing you to consider something more straightforward instead.

If you are a landlord that has recently sold or are looking to sell a property and are considering alternative investment options, then we’d love to hear from you.

Do you understand the impact of Capital Gains Tax on your investment?

Currently, the annual tax-free allowance for Capital Gains in the UK is ￡12,300. This, however, is due to change very soon.

The proposed government change is to reduce the annual tax-free exemption over the next two years. First, in April 2023, the exempt amount will be reduced by more than half to ￡6,000 per annum. Then, from April 2024, this amount will be halved again to ￡3,000 per annum.

This means that without careful planning, any individual selling an asset for a gain will likely pay more in CGT after April 2023.

Don’t worry, we have a solution for you!

If you’re an investor in the UK, gold and silver ‘Legal Tender’ coins are exempt from CGT. This means you can make an unlimited tax-free profit on investments of any size and value on any legal UK currency coins.

NB. This is not the case with standard gold and silver bars. Gold and silver bars have no denomination value, and even if purchased in the UK, are not representative of legal tender. This makes bullion bars subject to Capital Gains Tax. Examples of CGT-free UK coins include?Royal Mint Britannia Coins,?Royal Mint Sovereign Coins,?Royal Mint Queens Beast Coins?and?Royal Mint Tudor Beast Coins.

When searching for Capital Gains Tax-free coins on our website, tick the “UK” search filter in the left-hand menu.

Here To Help

We recommend that all readers should do their own research before making any purchases, but if you’d like to speak to a member of the team for some additional guidance, we’d be delighted to hear from you at 01769 618 618, or you can email us at [email protected], and we’ll get back to you asap.