There’s no disputing that buy-to-let property investors have had all kinds of challenges thrown their way over recent years. Nevertheless, the fundamental law of supply and demand has continued to do its work. It is therefore, still perfectly possible to make solid returns from buy-to-let in the UK.

You do, however, need to remember not only that the rules of buy-to-let investment have changed somewhat over recent years, but that they are very likely to continue to change and that your (continued) success as a buy-to-let investor will depend on keeping abreast of these changes. Below, Hopwood House discuss the following buy-to-let changes.

The new golden rule of buy-to-let investing – know the law

Of course, buy-to-let landlords have always had to follow the law, but recently there has been a whole lot more of it created for them to follow.

In addition to the infamous “right-to-rent” laws (and the challenges of implementing them without breaching the equality act), there are rules around HMOs, tenant deposits and fees in addition to all kinds of health-and-safety-related legislation.

At time of writing, the government is moving towards banning “no faults evictions” and proposing a mandatory minimum tenancy length. In short, the golden rule of buy-to-let property investment has now changed from being “location, location, location” to “legislation, legislation, legislation”.

The new silver rule of buy-to-let investing – know your taxes

Similar comments apply here. Taxes have been a fact of life for most of human history. There are literally countless jokes about this fact.

Taxes have, however, been getting rather more complicated over recent years. In the context of buy-to-let property investment, possibly the most significant change has been the removal of Mortgage Tax Relief.

Changes to capital gains tax are also in the pipeline and these could also have a noticeable impact on buy-to-let investors since they could take a bite out of the profits made from the sale of a buy-to-let property, hence leaving the investor with less money to reinvest elsewhere.

The new bronze rule of buy-to-let investing – choose your structure with care

Up until relatively recently, many buy-to-let investors simply bought property out of their disposable income and held it in the same way as they held their other tangible assets. Over recent years, however, there has been a growing trend of buy-to-let property investors holding property in limited companies.

The use of limited companies has often been described in the media as “the landlord loophole” and portrayed as a tax-management strategy. This is incorrect. Using any structure purely to avoid taxes is generally completely illegal and will typically result in action from HMRC sooner or later.

There are, however, many other valid reasons why buy-to-let property investors might want to hold their property portfolio within a limited company. For example, they may view it as a shield for their privacy. They may also appreciate the increased flexibility it offers, especially if they have their eye on estate planning.

They may also simply wish to draw a clear line between their business and their private life. Some buy-to-let investors may find that using a limited company also reduces their overall tax bill, however, per the previous comments; this should be seen as a useful bonus, rather than as a reason for using this structure.

Author Bio: Hopwood House are specialists in buy-to-let investment, with a wide range of high yield opportunities throughout the UK including property investments in Manchester, Liverpool and Birmingham.

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Daniel Peacock

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