08/11/2023
Why buy to lets aren’t a good investment.
So you want a buy to let property?
First, you’re going to need a 20/25% deposit on a buy to let mortgage. Let’s call it £50,000.
Then you have to:
1. Arrange the mortgage
2. Pay the conveyancing solicitor
3. Arrange insurance
4. Comply with building / fire regulations
5. Find a tenant
6. Collect the rent
7. Do the maintenance
8. Do a self assessment tax return to declare the rental income.
Not a simple and hassle fee investment.
Then the rent gets paid, this is classed as income so you will have to pay income tax rates at 20/40/45% on the rental income.
The mortgage is not tax deductible so you can’t deduct the monthly mortgage costs from the rental income. You have to pay tax on all of the income and still pay the mortgage.
But over the course of 30 years the mortgage will be paid off and you will own the property and get the rental income. It can work out well as it did for the last 40 years.
But the government are making it very tax inefficient to be a private landlord.
When you sell the property you pay 18/28% capital gains tax on the profits.
By contrast you can save more into your workplace pension:
1. You get tax relief on the contributions (so you don’t pay income tax on the money you pay in)
2. The money can grow tax fee until you want to spend it
3. You get your employers contribution which is like an increase in salary
The most important benefit that people overlook is you don’t have to do anything. The money in your pension is invested and grows over time with global markets, you don’t have to lift a finger.
Get in touch if you have had enough of your rental property and want to discuss your options.
