Can You Still Make Money with Buy to Let in the UK?

Buying-to-let investing has become popular in Britain. When many people view that cash savings are generating next-to-no interest, and the stock market is extremely volatile, they are forced to turn to invest in properties where they can get stellar returns. The most recent figures from Property Partner Market Index show that private landlords made an average profit of 9.6 percent last year. In the same period, the cash ISAs were only offering 1.4 per cent when the stock market lost about four per cent.


The landlords with an investment in London fared even better with their earnings hitting 16.5 per cent, and the worst North-east region offered a return of 2.6 per cent. In fact, over the past two decades, the buy-to-let property has generated an average total return of 24.3 per cent a year and an average of 15 per cent across the UK. The gains in the buy-to-let business have led many people to opt for the investment. Council for Mortgage Lender figures shows that there were 162,000 property purchases in March. It represented a surge by 180 per cent for mortgage buyers while for cash buyers, the surge rose by 80 per cent.

This rush to buy properties is expected to change very soon according to Property Partner’s prediction. Restrictions are coming in on mortgage relief for landlords that will double the annual tax bill for the high-rate taxpayers thereby making the buy-to-let property owners into losses. Many property experts believe that the majority of profit gained is due to the increase in property value and not the rental income. Mortgage holders will not make any returns due to high tax bills. The truth is that relying on house prices for a return might be frustrating for buy-to-let investors. There has been a feeling among many people that the house prices in the UK might have reached the peak in recent years making it better to have a period of more modest growth.

The new stamp duty land tax is already in place and is targeted at the private landlords. It is adding a three per cent on the up-front tax bill for those buying investment homes. The investors who are engaged in the buy-to-let business have responded with a ramped up activity in the property market in the recent months, which has pushed the house prices to a fresh record high. There is no doubt buy-to-let currently remains to be a worthy investment, but in the future with the proposed tax bill, it will be a loss to many investors who have earned their living from the business.

With the new tax bill expected to raise the amount of rent charged by the landlords, some tenants may be unable to pay their rent which translates to a loss of rental income to the landlord. In that case, it is important for a landlord to consider landlord insurance because it covers the risks not included in the home insurance policy such as the loss of rental income cover and employer’s liability insurance cover.