April 17, 2023 4:33 pm

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James Nicholson

What Every Prospective Buy-to-Let Investor Needs to Know:

What Every Prospective Buy-to-Let Investor Needs to KnowWe are often asked the question is buy to let a good investment still? Its the dream of lots of would be investors to purchase a property, rent it out and enjoy the profits. If you are considering investing in property I think its vital you have all the latest information.

While it may seem like buy to let is an easy investment opportunity, a lot has changed recently so it vital you know all the new rules.

There are things to consider like higher stamp duty and higher tax along with new requirements. Stamp Duty is now 3% on second homes so you need to take that into account when buying.

Buy to let investments now come with a higher tax rate than before. Another consideration is you will need a 25% deposit which some will find challenging. Its understandable that you might not know where to begin or if Buy To Let is the right investment for you.


Lets explore in-depth whether Buy To Let remains a viable investment in 2023 and beyond.



What Tax Do You Pay As A Landlord?

Those who purchase a second home are required to pay stamp duty at 3% of the value of the property. This means thats someone purchasing a buy to let 2023 for £250,000, they will pay £7500 Stamp Duty compared to ZERO if it was their primary residence.

If you live in Scotland investors buying a second home as a buy to let are required to pay 4% stamp duty.


A Closer Look At Section 24 And How It Affects Private Landlords

Closer Look At Section 24 How It Affects Landlords

In April 2020 the government introduced new tax rules for individual landlords. Property owners are now required to pay income tax on their total rental revenue, regardless of their mortgage expenses.

Landlords now receive a 20% tax credit, this means that private landlords with a mortgage can no longer fully offset mortgage interest costs against income tax liabilities on rental income.

This means landlords are now taxed on rental income rather than on their profits after accounting for mortgage interest payments.

If you are considering using a limited the good news is in that scenario your mortgage interest is still a deductible expense. Property owned by a limited company you can deduct the cost of your mortgage before paying corporation tax.

Those looking to run their property investments through a limited company should seek professional financial advice from a registered tax expert.


Navigating the Capital Gains Tax Changes: Understanding the Implications

Navigating the Capital Gains Tax Changes

Recent adjustments to Capital Gains Tax means that Buy To Let Investors now face a more substantial tax burden when selling their properties.

The Capital Gains Tax rate for residential properties is set at 28% for higher-rate tax payers and 18% for those on the basic rate. This compares to 18% and 10% on other assets.

In the recent Autumn statement Chancellor Jeremy Hunt announced a reduction in the tax-free allowance for capital gains tax from £12,300 to just £6,000 in April 2023.

This will be dropped from £6,000 to just £3,000 in 2024. As a result of these lower tax-free allowances, landlords will be subject to higher Capital Gains tax when selling their property in coming years.


Should You Establish a Limited Company?

If you are looking at becoming a landlord in in 2023, one significant question you might want to address is whether to acquire your buy to let property through a limited company.

If you are in the higher tax brackets (Income Tax) holding property in your personal name could result in 40% tax on your income.

Due to this we feel you should explore the option of buying your properties through a limited company. By doing this you would be subject to lower corporation tax which is 25% in 2023. However you can reduce your profits using a company by deducting any expenses you have such as mortgage payments, insurance, and maintenance.


Are There Inheritance Tax Benefits Of A Limited Company?

Landlords who want to transfer their property portfolio to their children or other family members can avoid inheritance tax by purchasing the properties in a Ltd Company.

You can transfer shares of the company to your children and avoid tax in future.

If this is something you would like to do in the future make sure you speak to an accountant to set this up correctly for you.


How Involved Do You Want To Be?

Its undeniable that buy to let investments demand time and effort. You will need to conduct research, then purchase the property and after that it needs to be managed.

Someone needs to go through the buying process, carrying out any renovations, furnishing the property and determining whether to get a letting agent or manage the property yourself.


What Advantages Can A Letting Agent Offer In Managing Your Property?

  • When investing its essential you are compliant with all the latest rules and regulations. Making sure you tick all the boxes and provide a safe property is helped by using a Letting Agent.
  • Your Letting Agent will do all the hard work for you, for example to rent your property you are required to obtain an Energy Performance Certificate (EPC) with a minimum rating of E.
  • Not only that you need to have electrical safety checks which must be conducted every 5 years as well as an annual gas safety check.
  • Having an agent to manage all of this for you will be extremely advantageous. It provides you with peach of mind and lightens your workload to allow you to focus on finding more deals. They will find tenants and give you long terms security by find good tenants.
  • I want to be hands off with my investments so I feel having a Letting Agent is a smart idea.


Is Property A Good Investment?

Is Property A Good InvestmentWith all the tax changes and new rules is property still a good investment? This comes down to your personal financial goal what do you want to achieve.

Lets look at the advantages and disadvantages for buy to let landlords below.


Pros Of Buy To Let

  • You receive rental income (although potentially lower than in previous years). In some regions up North such as Doncaster, Liverpool, Leicester a rental yield of 10% plus is achievable. While in the South you will be looking at a yield of between 3-5%.
  • You will also experience capital growth as your investment goes up in value over time. Property often doubles is value every 10 years.
  • Insurance policies are available to protect against loss of rental income, damage to your property and legal expenses.

Cons Of Buy To Let

  • Tax is higher than before which will reduce your profits.
  • Unless using the correct insurance you might not earn income if your property is vacant.
  • If your property decreases in value your net worth will decline. With an interest only mortgage you will need to compensate for any deficit if the property sells for less than the purchase price.
  • Consider expenses associated with stamp duty, insurance and wear and tear.
  • Being a landlord is a big responsibility, make sure you read more of our content before making a decision.


Its common for individuals to purchase buy to let property as a source of retirement income, people use their pension pot to use as deposits to do this.

If you are considering using your pension to purchase buy to lets property, it crucial you speak to a financial advisor beforehand. Accessing your pension fund can have significant consequences and maybe result in tax penalties.

Is buy to let worth it? YES

Is buy to let dead? NO

Ive been investing in property for 25 years, I have a number of rental properties and continue to invest to build a future for my family. My suggestion is you invest using a Ltd company and run your rental business with a letting agent.


Check out these blogs.

Should You Get An Interest Only Or Repayment Mortgage.

Property Refinancing For Beginners.

Why Paying Off Your Mortgage Is A Bad Idea.



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